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Alpha Fin Markets Consulting plc Full Year Results

24/06/2020 7:00am

UK Regulatory (RNS & others)


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RNS Number : 8670Q

Alpha Fin Markets Consulting plc

24 June 2020

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http://www.rns-pdf.londonstockexchange.com/rns/8670Q_1-2020-6-24.pdf

24 June 2020

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 and wealth management industry, is pleased to report its audited results for the 12 months ended 31 March 2020 (FY 20).

A YEAR OF FURTHER GROWTH AND STRATEGIC PROGRESS

Financial Highlights

-- Group revenue(1) increased by 17.0% to GBP90.9m (FY 19: GBP77.7m) and net fee income increased by 17.1% to GBP88.9m (FY 19: GBP76.0m)

-- Group adjusted(2) EBITDA increased by 22.9% to GBP20.2m (FY 19: GBP16.5m) and 17.8% on a comparable pre-IFRS 16 basis

-- Strong adjusted cash conversion of 106% (FY 19: 101%), with adjusted cash generation from operating activities of GBP19.9m (FY 19: GBP16.4m) resulting in a year-end net cash balance of GBP21.0m

   --    Adjusted earnings per share increased by 17.9% to 14.21p (FY 19: 12.05p) 

-- Group operating profit is GBP10.4m (FY 19: GBP12.6m) and basic earnings per share is 6.11p (FY 19: 9.05p) after adjusting expense items, which increased mainly as a result of the Axxsys and Obsidian acquisitions

-- No final dividend is recommended, in order to maintain maximum liquidity, given COVID-19 uncertainty

 
                                 12 months to     12 months to 
                                31 March 2020    31 March 2019    Change 
----------------------------  ---------------  ---------------  -------- 
 Revenue                             GBP90.9m         GBP77.7m     17.0% 
 Gross Profit                        GBP34.4m         GBP29.1m     18.3% 
 Adjusted EBITDA                     GBP20.2m         GBP16.5m     22.9% 
 Adjusted Profit before Tax          GBP18.6m         GBP16.2m     15.2% 
 Profit before Tax                    GBP9.3m         GBP12.5m   (25.8%) 
 Adjusted EPS                          14.21p           12.05p     17.9% 
 Basic EPS                              6.11p            9.05p   (32.6%) 
 Total Dividend per Share               2.10p            6.00p         - 
----------------------------  ---------------  ---------------  -------- 
 

Operating Highlights

-- Successful acquisition and integration of two new businesses, Axxsys(3) and Obsidian(4) , expanding the Group's geographic footprint and service proposition

   --    Extension of the Group's business practices with launch of Pensions & Retail Investments 

-- Addition of offices in Canada and Denmark, taking the Group to 12 client-facing offices globally

-- Strong growth in new clients globally; the number of clients that the Group has supported increased to 381 (FY 19: 279)

-- Continued investment in the highest calibre consultants(5) ; number of consultants increased by 20.4% to 436 (March 2019: 362)

   --    Expansion of the Group's director team through the addition of 13 directors(6) globally 

COVID-19 Update and Outlook

-- Transition to remote working executed swiftly and seamlessly; the entire team has adjusted very well and continues to service clients to the highest standards

-- Alpha took early decisive action to protect the business; alongside careful management of the Group's cash resources, protective measures included temporary salary sacrifices of 40% for the senior leadership team and Board, and 20% for the broader director team, modest staff furloughs, and the cancellation or deferral of all discretionary expenditure

-- In addition to GBP23m current June net cash position, in order to provide further flexibility the Group has recently agreed an increased revolving credit facility of GBP20m

-- The Group has made a solid start to the new financial year and continues to make selective investments in strategic hires

-- The Group is navigating a shifting business development landscape and continues to see opportunities, new wins and extensions to existing projects

-- The market drivers remain in place and the Group is confident that it is well positioned for future growth in market recovery

-- Ongoing uncertainty due to COVID-19 and early stage of the year mean that the likely impact on the business is difficult to predict with accuracy; as such, the Board believes it is prudent not to provide financial guidance for the current financial year

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

"The Alpha Group has delivered strong growth, expanded services and products, made two successful acquisitions and enhanced its market-leading reputation for the quality of its people and service delivery excellence.

Alpha continued to perform well in FY 20, grew and delivered on its strategic objectives, validating the Group's business model. This year has seen the Group invest further to deliver organic growth through expansion of the service offering and investment in the highest calibre people, including several key senior hires. We also successfully completed and integrated two acquisitions, increasing the Group's capability and ability to provide a highly compelling proposition to the asset and wealth management industry.

I am pleased to report that we have delivered good growth across all the Group's financial KPIs, growing revenues by 17.0% and generating over GBP20m of adjusted EBITDA, up by 22.9% compared to FY 19, with improved H2 20 momentum . In particular, I am pleased with the performance in North America, where we continue to see a wide domestic client base and significant further growth potential.

Following another successful year, we are now in a period of economic uncertainty relating to the COVID-19 pandemic. In recent months, we acted quickly to ensure the safety of our people, transition seamlessly to remote working, manage costs and protect our robust balance sheet. We continue to monitor the situation and will take appropriate actions to manage the business to address the potential impacts of COVID-19. With the strength of the Alpha proposition and protective measures taken, the Group is well positioned for the market recovery."

Enquiries:

 
                                                      +44 (0)20 7796 
                                                       9300 
 
 Alpha Financial Markets Consulting plc 
  Euan Fraser, Global Chief Executive Officer 
  John Paton, Chief Financial Officer 
                                                       +44 (0)77 9542 
  Temple Bar Advisory (Financial Public Relations)     5580 
  Alex Child-Villiers                                  +44 (0)78 2796 
  William Barker                                       0151 
  Sam Livingstone                                      +44 (0)77 6965 
                                                       5437 
  Grant Thornton UK LLP (Nominated Adviser) 
  Philip Secrett                                       +44 (0)20 7383 
  Richard Tonthat                                      5100 
  Harrison Clarke 
 
  Berenberg (Broker) 
  Chris Bowman 
  Toby Flaux                                           +44 (0)20 3207 
  Alix Mecklenburg-Solodkoff                           7800 
 

Analyst Presentation:

A results presentation from Alpha will take place at 9.30 a.m. on the day by conference call. Those investment analysts wishing to attend should email alpha@templebaradvisory.com .

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

(1) FY 19 revenue is restated to reflect the presentation of revenue gross of rechargeable expenses. Refer to note 1 of the financial statements for further detail and note 2 for a reconciliation of revenue to net fee income

(2) 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 note 3 for further details

(3) "Axxsys" refers to Axxsys Limited and its subsidiaries, acquired by the Group in June 2019

(4) "Obsidian" refers to Obsidian Solutions Limited, acquired by the Group in November 2019

(5) "Consultants" and "headcount" refer to fee-generating consultants at the year end: employed consultants plus utilised contractors in client-facing roles

(6) "Directors" 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

Chairman's Report

Introduction

It gives me great pleasure to present to you the Annual Report & Accounts of the Group for the 12 months to 31 March 2020. As we end our third year as a public company, Alpha continues to deliver strategically, operationally and financially. Whilst the Board(7) continues to monitor the global uncertainty caused by COVID-19 situation closely, our position at the end of FY 20 represents a strong validation of the Group's strategy and places Alpha well for the market recovery.

Overview of the Financial Year

I am delighted that Alpha continued to perform well across its business areas and met market expectations for the year ended 31 March 2020. The Group has also made strategic progress, including the acquisition of two new businesses, Axxsys and Obsidian; launching its Pensions & Retail Investments ("P&RI") practice; as well as growing its highly skilled team including several key senior hires. This is all coupled with the continued success of Alpha's core consulting services globally, including an especially strong performance from the business in North America.

The Group has achieved annual revenue growth of 17.0% on the previous financial year to GBP90.9m. I am also pleased to report the Group's highest ever adjusted EBITDA of GBP20.2m (FY 19: GBP16.5m) and growth in adjusted earnings per share of 17.9% to 14.21p. Basic earnings per share was 6.11p, after increased adjusting costs as set out in note 3 of the notes to the consolidated financial statements.

During the year, through the acquisitions of Axxsys and Obsidian, the Group has expanded its geographic footprint further into Canada and Denmark, as well as establishing a software development capability centre aligned to Alpha Data Solutions ("ADS") in Serbia. Alpha's clients remain central to everything that the Group considers and does, and this will continue to drive investment both in offices and consulting practices that support Alpha's existing and prospective base of clients.

Governance and the Board

Alpha maintains a robust corporate governance framework and continues to ensure that it reflects the needs of the Group's shareholders, employees, clients and wider stakeholders. The Board has significant knowledge of the asset and wealth management industry, as well as a deep pool of leadership experience to draw from.

The Board continues to review and evolve the corporate governance framework, and this has included the appointment of Prism Cosec as Company Secretary from October 2019. This creates a fully dedicated function, separate from the executive role of Chief Financial Officer, in line with governance best practice. Prism Cosec brings experience and expertise to assist in monitoring and further improvement of the corporate governance framework and processes.

Having altered the composition of the Board committees to enhance independence in the previous financial year, we committed to the appointment of an additional independent Non-Executive Director before the 2020 Annual General Meeting ("AGM"). As recently announced, I am very happy that Jill May has agreed to join the Board from July 2020 and I look forward to Alpha benefitting from her range of experience across financial services, regulation and public companies.

As part of its activities during the year, the Board resolved to rename the Audit Committee as the Audit and Risk Committee. This change confirms the Board's ongoing commitment to risk control and management, and better reflects the role and activities of the Committee in assisting the Board to oversee the risk management framework of the Group. The governance arrangements and responsibilities of the Audit and Risk Committee remain unchanged.

I am also delighted that we are introducing formal environment, social and governance ("ESG") and sustainability reporting into this year's Annual Report, including the disclosure of a number of ESG metrics for the first time. We believe that the provision of these non-financial metrics and reporting will allow us to facilitate an understanding of Alpha as a risk-managed business that is equipped for sustainable, long-term growth.

The Board continues to meet regularly to oversee the Group's activities, to ensure the Group progresses with its strategic objectives, and that we adhere to our core values of governance, integrity and business ethics. One of the actions from last year's Board evaluation and effectiveness review process was to ensure that it remains directly and closely engaged with the Group's management teams, and I am pleased to report that the Board has received and discussed presentations from a number of the regional and operational teams during FY 20.

Strategy

The Group continues to make progress on its strategic objective to be recognised as the leading global asset and wealth management consultancy. As Alpha expands the breadth and depth of its service offering, the focus remains on understanding the needs of its clients and providing them with the highest quality service. Whilst historically the majority of the Group's growth has been organic, the Board recognises the benefits of increasing the breadth of the service offering through both selective acquisitions and expansion of the senior team.

This year, the Group has successfully built upon the strategy of extending and deepening the range of services that it offers. With the introduction of the P&RI practice, Alpha can replicate its highly successful business model into a new area and has hired a number of high-performing individuals to lead and work in the new practice. At the same time, organic growth has been achieved in all regions. The Board and I are particularly pleased with the performance in North America and the addition to the Group of an office in Canada to further support this growth.

Alpha will continue to invest in and incentivise its high-performing employees, financially through a market-leading incentive package, operationally through effective support and communication, and culturally through a range of initiatives across social events, corporate social responsibility, diversity and inclusion, wellbeing, and performance recognition. I am confident that Alpha's growth and performance further validates the Group's overall strategy in the long term as we navigate through the global events that are currently impacting every aspect of our lives.

Dividend

In light of the uncertainty caused by the COVID-19 pandemic, the Board has decided not to recommend a final dividend for the year ended 31 March 2020. The Board considers that, during these exceptional times, it is in the best interests of all stakeholders to preserve the strength of the Group's balance sheet to provide maximum flexibility throughout, so that Alpha is as well positioned as it can be for the future. Therefore, the total dividend for FY 20 comprises only the previously paid interim dividend of 2.1p.

Outlook and COVID-19

The Alpha Board recognises that COVID-19 provides challenges to all areas of life, to both the Group and the asset and wealth management industry at large. However, the Group starts its new financial year with strength across its people, strategy, finances and business model. The Group has taken pre-emptive measures to limit the immediate effects of COVID-19, which included implementing remote working arrangements and reducing spend appropriately to maximise liquidity.

Given the current environment, the Board is pleased with a solid start to trading in the current financial year. Whilst the Board is monitoring closely the situation presented by the COVID-19 pandemic, including the impact on win rates, sales cycles and project start dates, now and over the coming months, we continue to see opportunities, new client wins and extensions to existing projects. The Board remains confident that Alpha's strengths mean that it is positively positioned, with the underlying industry trends of cost reduction, changing regulation and increasing assets under management remaining in place, to drive client demand for Alpha's quality consulting services. In light of the ongoing uncertainty and the early stage of the new financial year, the likely financial impact on the business is difficult to predict with accuracy. As such, the Board believes it is prudent not to provide financial guidance for the current financial year.

Finally, I would like to thank Alpha's Board of Directors, management team and employees for their continued hard work, dedication and contributions this year, especially given the disruptions presented by COVID-19. I look forward to continuing to make positive progress and pursuing the Group's long-term strategic goals.

Ken Fry

Chairman

24 June 2020

(7) "Alpha Board" is the Alpha Board of Directors, also referred to as the "Board of Directors", the "Board" and the "Directors"

Global Chief Executive Officer's Report

Introduction

Welcome to Alpha's third set of full-year results as a public company. I am pleased to report that we have achieved a further year of strategic progress as the Group continues the momentum from previous years.

We have delivered on our strategic growth objectives through the launch of the Pensions & Retail Investments practice and the successful acquisition and integration of the Axxsys and Obsidian businesses. Through our strong and comprehensive service offering and the performance of our highly skilled team of consultants, Alpha has enjoyed a good year of growth in the underlying business, as shown by increases in revenue, adjusted EBITDA, adjusted profit after tax and adjusted earnings per share ("EPS"). Operating profit and profit after tax have reduced as a result of increased adjusting items, primarily driven by the Group's acquisition activities in the year.

COVID-19

We now face a period of economic uncertainty in the face of the global COVID-19 pandemic. Alpha, like many companies, is seeing the effects of this crisis on its business and business planning. At the time of writing, given the strength of the Alpha service proposition and a strong balance sheet entering the new financial year, the Group is well positioned for the market recovery. We have also taken steps to protect the business, including limiting recruitment to only a small number of strategic hires, maximising our cash position and reducing discretionary operational expenditure. Alpha's director team has taken a voluntary temporary reduction of 20 per cent in salary for six months and the Group's senior leadership team, including the Global Chief Executive Officer, Chief Financial Officer and the Non-Executive Directors of the Board, have taken a voluntary temporary 40 per cent reduction in salary and fees. We have also implemented modest staff furlough plans within the UK and Europe, which we believe is prudent to retain maximum flexibility in protecting the business.

To date, the Group has seen minimal impact to its in-flight projects, following a successful and seamless transition to remote working with its clients. Core projects have continued to progress with minimal pressure on fee rates, no material cancellations and excellent client feedback. Alpha, similar to many companies, is facing a shifting business development environment but has continued to make solid progress at the start of the new financial year, with good win rates and project extensions. We also expect that the earlier cost protection actions we have taken will help us through the uncertainty going forwards. The Board and leadership team will continue to monitor data points and leading indicators to respond appropriately to market conditions.

Summary of Financial Performance

The Group has continued to demonstrate strong growth in the year, despite the market and political uncertainty globally through much of 2019, including around the UK's Brexit discussions and general election. This has resulted in net fee income(8) increasing by 17.1% to GBP88.9m (FY 19: GBP76.0m), adjusted EBITDA by 22.9% to GBP20.2m (FY 19: GBP16.5m) and adjusted profit before tax by 15.2% to GBP18.6m (FY 19: GBP16.2m). The outstanding work that our consultants deliver while working on some of the largest, most complex and challenging projects in the asset and wealth management industry has allowed us to see excellent client retention rates as well as the addition of new clients in all regions.

I am particularly pleased to report that the North American region achieved excellent growth this year, as expected, with net fee income increasing by 57.4% to GBP14.4m (FY 19: GBP9.2m) and revenue similarly. This demonstrates that our blueprint for geographic expansion is successful, and we will continue to invest in people and further our global reach, while exercising prudence, as part of the Group growth strategy.

While I am pleased with FY 20 performance, the Board is not recommending a final dividend for the year. We believe that this is the correct, prudent approach to maximise the Group's balance sheet strength through the current period of uncertainty, to align with the cost mitigants and deferrals implemented across the business and, in the interests of all stakeholders, to help position Alpha as well as possible for the future.

Operational Review

During the year, the Group continued to see strong demand for its service offering, subject matter expertise and consulting support across the asset and wealth management value chain. At a global level, I am delighted to confirm that the Group added 102 new clients during the year, with a number of those coming from our successful acquisitions and integrations of Obsidian and Axxsys, as well as in new jurisdictions including Australia and Canada. Continued interest in and demand for the Alpha proposition enabled a good set of results to be delivered across all the Group's core geographies: the UK, North America, Europe & Asia.

We have continued to progress our strategy through organic growth, developing the service offering for our clients and delivering value for our stakeholders. We have seen continued expansion and good revenue contributions from our well-established practices such as Investments, Distribution, M&A Integration and Operations & Outsourcing, as well as a further geographic expansion of these core practices within our global offices. We also saw a good performance from our newer practices such as ETF & Indexing, Digital and Regulatory Compliance. We expect to see further interest and demand in those areas as structural drivers such as demographic change increase the importance of effective digital experiences, and as the industry continues to consolidate and implement further regulatory changes. The ADS component of the business has also made progress in the year, both through increasing its client footprint and the acquisition of Obsidian.

During the year, we launched the P&RI practice as part of a roadmap to move into the insurance sector and strategy to diversify our service offering across the value chain. We welcomed two new directors to the UK team to lead the practice and are delighted that their increasing client focus in this space, combined with working closely with other Alpha business practices to ensure that we can provide a comprehensive proposition and delivery experience for all our clients, is already gaining traction with new client project wins.

As the business grows, it is increasingly important for us to assess and disclose how sustainability informs the way we plan and operate. The overriding objective has always been to ensure that our business model remains effective and sustainable in the longer term. As part of this, we have consolidated and are in the process of formalising Alpha's ESG approach. We have begun the journey to adhere to a formal disclosure framework, a description of which we are including in our Annual Report 2020.

In the last month of the financial year, our key operational focus was securing the health and safety of our people and transitioning to remote working in the context of the COVID-19 pandemic. Leveraging our strong operational, technological and cultural foundations, we were able to transition quickly and effectively, and did not see any material disruption to our business operations. We have also worked closely with all our clients, again without material disruption to our client delivery engagements. As we enter a period of economic uncertainty, I am confident that our high-performing team and flexibility to respond to client demand in many different environments and locations will help ensure that we remain resilient and can fully support our client stakeholders through this turbulent time.

Geographic Overview

As a global business, we can provide an exceptional end-to-end advisory service to our clients, irrespective of where they are located; as well as support our larger clients on international change programmes. I am delighted to present our regional financial figures for the period:

 
                          12 months         12 months 
                                 to                to    Change 
                      31 March 2020     31 March 2019 
-----------------  ----------------  ----------------  -------- 
 Net Fee Income 
 UK                        GBP50.5m          GBP45.4m     11.4% 
 US                        GBP14.4m           GBP9.2m     57.4% 
 Europe & Asia             GBP24.0m          GBP21.4m     11.7% 
-----------------  ----------------  ----------------  -------- 
 Year-end totals           GBP88.9m          GBP76.0m     17.1% 
-----------------  ----------------  ----------------  -------- 
 
 
                          12 months         12 months 
                                 to                to    Change 
                      31 March 2020     31 March 2019 
-----------------  ----------------  ----------------  -------- 
 Gross Profit 
 UK                        GBP22.3m          GBP19.7m     12.8% 
 US                         GBP4.8m           GBP1.7m    187.3% 
 Europe & Asia              GBP7.3m           GBP7.7m    (4.1%) 
-----------------  ----------------  ----------------  -------- 
 Year-end totals           GBP34.4m          GBP29.1m     18.3% 
-----------------  ----------------  ----------------  -------- 
 
 
                                  As at            As at 
                          31 March 2020    31 March 2019    Change 
----------------------  ---------------  ---------------  -------- 
 Consultant Headcount 
 UK                                 217              174     24.7% 
 US                                  68               55     23.6% 
 Europe & Asia                      151              133     13.5% 
----------------------  ---------------  ---------------  -------- 
 Year-end totals                    436              362     20.4% 
----------------------  ---------------  ---------------  -------- 
 

I am very pleased with the exceptional growth that we have seen this year in the North American business, achieving our aim to make substantial gains in that market after investing in and strengthening the team in the previous year. We added several new domestic clients in the region, which has demonstrated the importance, interest and breadth of the Alpha service offering to clients on both sides of the Atlantic. We have also established an office in Toronto as part of our acquisition of Axxsys, which both complements and enhances the reach of our existing US offices. Our growth in North America has also been recognised by Forbes , who identified us as one of "America's Best Management Consulting Firms" this year .

The UK remains the geography with the largest revenues within the Group and we are delighted with the growth achieved this year in the context of some sustained political and economic uncertainty. Decision making from many clients improved following the UK General Election, although it has been disrupted once again with the onset of COVID-19. We are monitoring the situation and will continue to act to protect our business and people, as and when required, in a careful and considered manner.

There was a consistent performance across Alpha Europe & Asia, which includes offices in Singapore, France, Luxembourg, the Netherlands, Switzerland and, following the acquisition of Axxsys, Denmark. We continue to be recognised as one of the leading management consultancies in those jurisdictions, once again being recognised as a "#1 consulting firm" by Decideurs Magazine in France(9) . We see the Nordics and Central Europe as a key area of growth and, as part of this, the Group appointed a new Chief Executive Officer of Central Europe for Axxsys. This appointment is a significant move in our strategic objective to become a market leader in that area.

We see Asia as a region with exceptional growth potential over the longer term. We have been extending our footprint there by growing our team in Singapore and implementing projects for clients across the region, including in Hong Kong and Australia. We will continue to invest in our people there to ensure that we can demonstrate Alpha's fantastic knowledge and talent, as well as take advantage of opportunities that arise.

The Group's year-on-year growth reflects an expanding international footprint and growing global reputation as the consulting partner of choice for clients across the asset and wealth management value chain as we continue to support some of their most complex and challenging projects. Our strong financial figures, international awards and operational growth indicates that we have a geographical expansion blueprint that remains successful and allows us to be well positioned for the years ahead.

Our People

Alpha's people are our greatest strength and we are proud of the exceptional calibre and commitment of our global teams. The quality of our people allows us to support and deliver some of the most complex and high-profile change programmes within the asset and wealth management industry, and to retain very strong recognition and loyalty across our client base.

We are committed to hiring and retaining the very best quality of people at every level, and this year we have increased our global headcount to 436 (March 2019: 362). Of that headcount figure, an increase of 30 is attributable to the organic growth of the existing business, with the remaining 44 arising from the Group's acquisition activity in the year. We have also increased our director team by 13 globally, through a combination of key hires and promotions, which further reflects our growth and investment in people this year.

We recognise the high performance of our people through financial, operational and other people-orientated initiatives and incentives. We are proud to have market-leading compensation packages to ensure that we attract and retain the very best consulting talent. We provide our employees with a profit share, linked to Company performance, as well as the opportunity to take part in employee equity schemes to become shareholders in Alpha. During the reporting period, 3,374,881 share options were awarded to new joiners and certain members of the senior management team. As of 31 March 2020, approximately 17% of the Company's issued share capital with voting rights was held by employees. We will continue to benchmark our financial incentive schemes against the industry in order to maintain best-in-class compensation and, therefore, attract the best candidates in the market and achieve market-leading retention rates.

In supporting a global client base, our consultants are required to work across different locations and time zones. We make sure that our technology and operations are cloud based, secure and versatile to allow them to work wherever they need in order to support our clients most effectively. Our strong operations were put to the test following decisions to work from home due to COVID-19, and the resilience of our people and operational infrastructure meant that we were able to quickly and successfully move to remote working whilst maintaining every aspect of delivery excellence for our clients.

Alpha's unique culture and quality have always been an important part of working at Alpha and a fundamental part of our historic success. We work hard to maintain the same culture globally, which in turn ensures the same high level of quality of delivery for our clients. This unique culture has been recognised globally, for example allowing us to win a place in the Sunday Times 100 Best Small Companies to Work For list for four consecutive years, as well as being named as a "Best of the Best" in the 2020 Asia Asset Management Awards (Journal of Investments & Pensions).

We remain committed to providing an open and collaborative working environment. Following the transition to remote working due to COVID-19, the Alpha team designed and launched an internal programme that focusses on the pillars of wellbeing, productivity, technology and community. By sharing best practice, keeping connected, optimising the use of remote functionality and tools, and supporting one another, our people are promoting the very best aspects of the Alpha culture.

Our employees are and will always be the main reason for the Group's ongoing success. Whether this is in developing new products and ideas through the "Innovation at Alpha" platform, running our Diversity and Inclusion initiatives, or deciding on our partnership with a charity for the year, they remain central to how Alpha is run.

Growth Strategy and Acquisitions

The Group continues to follow a growth strategy that is both organic and inorganic to achieve its objective to be recognised as the leading global asset and wealth management consultancy. In the period, as part of the strategy, the Group has expanded through acquisition into complementary data and technology services.

Historically, Alpha has mainly grown organically, and experience has shown that our business model can lead to successful expansions of our service offering, geographic footprint and our ability to cater to increasingly large parts of the asset and wealth management value chain, such as vendors and third-party administrators in addition to traditional asset managers and asset owners. We continue to see shifting structural changes across the industry, and we will utilise our reputation for exceptional service to act on opportunities for organic growth as part of our strategy. We have increased our range of services in the past year from 12 practices to 13, and we expect that to grow as we explore new industry opportunities and client propositions.

During the year, the Group made two strategic acquisitions. In both cases, the acquired organisation provided services that enhanced the Group's strengths and business lines, which in turn enhanced our client proposition in all regions. The addition of Axxsys has brought a strong technology-led consulting service offering to the Group's core functions, in particular, extending our expertise in SimCorp and investment management platforms. Meanwhile, Obsidian has created a strong complementary software development and product expertise within the ADS team.

These acquisitions have added to Alpha's organic growth this year, enabling strong local introductions and cross-selling opportunities in the markets where they operate, with Obsidian bringing an increased focus on the alternatives space and Axxsys incorporating a strong pension client base. Acquisition remains a key part of the Group's growth strategy and we will continue to monitor how we implement that strategy in line with both market opportunity and client demand. We will keep seeking investment opportunities that provide diversified and established revenues, looking in particular at data and product businesses and technology consulting firms that can complement and grow the Group's service offering.

Current Trading and Outlook

We are reporting on a strong FY 20 but remain conscious that we are navigating a period of economic uncertainty. Despite these difficult times, and at the point of writing, we have seen a limited impact on change projects and Alpha remains in a good position with a substantial net cash balance, a strong client base and a robust business model.

I am confident that the structural drivers facing the industry remain and, therein, the opportunity to continue to broaden our geographic footprint and offering for clients, and, in turn, for our investors. We are monitoring and responding to the COVID-19 situation as it unfolds and we are in a good position to evolve and adapt our approach as is required.

Finally, I would like to join with Ken in thanking everyone at Alpha. The business growth and successes that Alpha enjoys would not be possible without the teamwork, energy and dedication of all Alpha's employees in delivering projects of the highest quality every day for our clients. The response of our people to the COVID-19 challenge globally has demonstrated the exceptional talent, resourcefulness and team spirit across the Group. I believe that Alpha has the best consulting team in the industry, which will continue to position the Group well and allow us to achieve our strategic objectives.

Euan Fraser

Global Chief Executive Officer

24 June 2020

(8) Net fee income is revenue net of incidental rechargeable expenses. Please see note 3 for further detail

(9) Joint first position with McKinsey and BCG in "asset management"; joint first position with Bain, McKinsey and BCG in "wealth management"

Chief Financial Officer's Report

Group Results

I am pleased to report that Alpha has delivered another year of further strong growth during a year of geopolitical uncertainty.

 
                                                                       Change 
                                                          Change vs     vs FY 
                              FY 20      FY 20     FY 19      FY 19        19 
                            IFRS 16     IAS 17    IAS 17    IFRS 16    IAS 17 
------------------------  ---------  ---------  --------  ---------  -------- 
 Revenue                   GBP90.9m   GBP90.9m  GBP77.7m      17.0%     17.0% 
 Net Fee Income            GBP88.9m   GBP88.9m  GBP76.0m      17.1%     17.1% 
 Gross Profit              GBP34.4m   GBP34.4m  GBP29.1m      18.3%     18.3% 
 Operating Profit          GBP10.4m   GBP10.4m  GBP12.6m    (17.1%)   (17.6%) 
------------------------  ---------  ---------  --------  ---------  -------- 
 Adjusted EBITDA           GBP20.2m   GBP19.4m  GBP16.5m      22.9%     17.8% 
------------------------  ---------  ---------  --------  ---------  -------- 
 Adjusted EBITDA Margin       22.8%      21.8%     21.7%       1.1%      0.1% 
------------------------  ---------  ---------  --------  ---------  -------- 
 Adjusted Profit before 
  Tax                      GBP18.6m   GBP18.7m  GBP16.2m      15.2%     15.5% 
------------------------  ---------  ---------  --------  ---------  -------- 
 Profit before Tax          GBP9.3m    GBP9.4m  GBP12.5m    (25.8%)   (25.3%) 
------------------------  ---------  ---------  --------  ---------  -------- 
 Adjusted EPS                14.21p     14.26p    12.05p      17.9%     18.4% 
------------------------  ---------  ---------  --------  ---------  -------- 
 Adjusted Diluted EPS        13.62p     13.67p    11.77p      15.8%     16.2% 
------------------------  ---------  ---------  --------  ---------  -------- 
 Basic EPS                    6.11p      6.16p     9.05p    (32.6%)   (31.9%) 
------------------------  ---------  ---------  --------  ---------  -------- 
 

The Group has experienced almost no FY 20 effect on trading from the COVID-19 lockdowns and related social distancing measures, given the swift transition to effective remote working by our clients and consultants and the timing of the Group's year end. Alpha has implemented a number of cost mitigations in recent months to prepare for this more uncertain environment and continues to monitor developments closely for the year ahead.

Revenue

The Group has delivered another strong year of progress, growing revenue and net fee income 17.0% and 17.1% respectively on the previous year, delivered through both organic and inorganic growth. Organic revenue(10) growth totalled 7.7% in the year.

Alpha North America delivered the strongest regional growth with net fee income up 57.4%, almost entirely organically. The North American business expanded its domestic client base in the year, supporting a good range of client projects, including several longer duration acquisition and integration, operations transformation and systems implementation projects, which lifted consultant team utilisation substantially from last year, reaching Group target levels. The UK business, Alpha's geography with the largest net fee income, grew 11.4% overall, benefitting from strong growth in Alpha Data Solutions ("ADS") and the additional Axxsys contribution in the year, while good client demand maintained close to target consultant utilisation levels, mitigating a weaker UK contracting environment. Alpha Europe & Asia delivered 11.7% regional growth, with a consistent organic revenue performance across the region overall, complemented by the contribution from Axxsys Europe, which grew well in the year with new client wins and team headcount expansion.

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, including Investments, Distribution, M&A Integration and Operations & Outsourcin g, as well as progress in newer practices, including strong growth in Regulatory Compliance in the year. Alpha's ETF & Indexing practice, launched in March 2019 to further enhance Alpha's response to the growing significance of index funds and exchange traded derivatives, made strong progress in the year in multiple geographies. Alpha's Pensions & Retail Investments practice, launched in September 2019, gained good traction by winning a number of projects in H2 20(11) , both with existing and new client relationships. Alpha's growth was supported by further investment in the global consultant headcount, with the number of consultants (including contractors) reaching 436 by the year end (March 2019: 362).

Group Profitability

The Group also increased its profits. Gross profit rose 18.3% to GBP34.4m (FY 19: GBP29.1m), improving margin, as a percentage of net fee income, to 38.7% (FY 19: 38.3%). This reflects a combination of near target consultant utilisation levels, margin benefit from improved consultancy mix, headcount growth, and lower overall employee profit share accruals partially offset by continued investment in the business, including 13 director appointments. North American margin improved with strong growth lifting consultant utilisation through the year, UK margin was relatively consistent and Europe & Asia margin eased slightly, reflecting more mixed market conditions.

Group administrative expenses, before the adjusting items detailed in note 3 of the consolidated financial statements, increased to GBP15.0m (FY 19: GBP12.6m) on a comparable basis. Adjusted administrative costs increased 18.9% overall, including both the inorganic addition of Axxsys and Obsidian costs since acquisition and on an organic basis, which was principally from increased Group central management team resource supporting the overall business growth globally, larger technology security and infrastructure improvement spend, and higher professional fees, together offsetting lower consultant recruitment spend in the year. Including the adjusting items, administrative expenses increased to GBP24.0m (FY 19: GBP16.5m), reflecting the one-off acquisition, integration and other costs related to the on-boarding of Axxsys and Obsidian, as set out further in note 3.

Adjusted EBITDA grew 22.9% to GBP20.2m (FY 19: GBP16.5m). The Group adopted the new accounting standard IFRS 16 Leases for the first time in the year, as set out in note 6, on a modified retrospective basis. On a comparable basis, as set out above and in note 6, adjusted EBITDA grew 17.8%, in line with revenue growth and margin was consistent at 21.8% on a comparable basis (FY 19: 21.7%). Reported margins improved further on this basis. Adjusted profit before tax increased by 15.2% to GBP18.6m (FY 19: GBP16.2m). This metric is comparable under the new standard and also reflects the increased ADS capitalised development amortisation charge in the year.

Group operating profit decreased by 17.1% to GBP10.4m (FY 19: GBP12.6m) after charging all costs including the adjusting items listed in note 3. These cost adjustments, which are detailed in note 3 of the consolidated financial statements, increased to GBP8.4m (FY 19: GBP3.6m) due to the Axxsys and Obsidian acquisition-related costs, including increased employment-linked consideration in the year. The share-based payment charge, including relevant social security costs, increased in the current year reflecting new awards, time elapsed and updated current year valuation assumptions. Further details are set out in notes 3 and 16. Similarly, profit before tax reduced to GBP9.3m after charging these increased adjusting item costs, increased depreciation and increased finance expenses.

Currency

Currency translation had a minimal impact on both net fee income and profits in FY 20, as a result of a flat average sterling against key currencies. In the year, sterling averaged $1.28 (FY 19: $1.31) and EUR1.15 (FY 19: EUR1.13). Currency translation immaterially increased FY 20 net fee income by GBP0.3m (0.4%). The statement of comprehensive income reflects GBP1.3m currency gain on asset translation.

Net Finance Expense

Net finance costs increased in the year to GBP1.1m (FY 19: GBP0.1m), representing the first full-year adoption of IFRS 16 Leases and the annual unwinding of the discount applied to deferred and earn-out consideration due on recent acquisitions. Since its admission to AIM, the Group has operated with a net cash position.

Taxation

Pre-tax profit, after non-operating items, was GBP9.3m (FY 19: GBP12.5m). The Group's tax charge for the year was GBP3.1m (FY 19: GBP3.3m), reflecting the lower taxable profit, disallowable expense items and the blended tax rate of the jurisdictions in which the Group operates. The Group's cash tax payment in the year was GBP2.4m (FY 19: GBP2.0m).

For further taxation details, see note 7 to the consolidated financial statements. Adjusted profit after tax is shown after adjustments for the applicable tax rates on adjusting items as set out in note 3.

Acquisition Activity

Complementary bolt-on acquisitions that enhance the product and service proposition offered to Alpha's clients are an important part of the Group's strategy. The Group made two acquisitions during the year, Axxsys and Obsidian, in June and November 2019 respectively. Both businesses have performed well since acquisition.

Axxsys has integrated into the Group well and grown since acquisition, particularly in further expanding the team to take advantage of opportunities across Europe. Since June, Axxsys has contributed GBP7.1m revenue with margin improvement through the year.

Since acquiring Obsidian in November within ADS, the combined ADS Obsidian product has been successfully implemented for an Alpha client, and the Obsidian technology integration work to enhance Obsidian product security features and align technology protocols with the ADS 360 SalesVista product set has largely been completed. These one-off integration costs total GBP0.5m to date. Obsidian has contributed GBP0.2m revenue since acquisition and is well placed for further growth within ADS.

Earnings per Share

Adjusted EPS improved 17.9% to 14.21p per share (FY 19: 12.05p) and, after including the adjusting expense items, the basic EPS is 6.11p per share (FY 19: 9.05p). Adjusted diluted EPS increased 15.8% to 13.62p (FY 19: 11.77p). At the year end, 6,490,661 share options remained outstanding and no share options vested in the year.

Cash Flow and Net Funds

The Group enjoyed strong cash generation with net cash generated from operating activities rising to GBP18.2m (FY 19: GBP16.4m) and, after adjusting for employment-linked acquisition payments, to GBP19.9m (FY 19: GBP16.4m). This represents a 106% adjusted cash conversion rate from adjusted operating profit, improving on FY 19's 101% adjusted cash conversion rate, through working capital focus and internal process rigour around timely debtor collection.

The Group's income tax paid totalled GBP2.4m (FY 19: GBP2.0m). A total of GBP7.3m acquisition payments were paid in the year, net of cash acquired, in relation to both the Axxsys and Obsidian initial consideration payments plus acquisition related costs. The increase in capital expenditure in the year reflects the now completed 360 SalesVista investment programme designed to enhance product data security, improve implementation simplicity and add product functionality.

Net interest paid was GBP0.1m (FY 19: GBP0.1m), reflecting the cost of maintaining the Group's revolving credit facility ("RCF") less the benefit of holding net cash balances through the year. At the year end, the Group's cash position had improved to GBP21.0m net cash or GBP26.0m total (FY 19: GBP18.6m), having drawn Alpha's GBP5m revolving credit facility in full shortly before year end to maximise liquidity, in anticipation of a COVID-19 effect.

After the year end, the Group further improved its available liquidity by renewing and extending its committed RCF with Lloyds Banking Group into a GBP20m committed facility expiring in June 2023 with an improvement to terms. The two RCF covenants are a 2x maximum net debt to adjusted EBITDA ratio and a 4x interest cover covenant. This facility, alongside cash balances, ensures Group funding flexibility.

Statement of Financial Position

The principal changes to the Group's statement of financial position relate to acquisition activity and the adoption of IFRS 16 during the year. The increase in the Group's total non-current assets is principally driven by a combination of acquisition intangibles, the addition of lease right of use assets under IFRS 16 and the investment in the ADS software product.

Increases in trade receivables and payables represent the enlarged group. Acquisition related deferred consideration and earn-out payments increased both current and non-current liabilities as at 31 March 2020, as set out in note 11. Deferred tax liabilities arise on timing differences and increased in the year mainly due to acquisition related timing differences.

The year-end net cash balance improved after acquisition payments, investment in the business and payment of dividends to shareholders in the year.

Dividends

The Board is not recommending a final dividend this year (FY 19: 4.09p), given the exceptional COVID-19 circumstances and the subsequent business uncertainty. Alongside the other cost mitigants and deferrals, Alpha seeks to best maintain its strong balance sheet to maximise flexibility. Therefore, the FY 20 interim dividend of 2.10p per share is the total dividend for the year (FY 19: 6.00p).

Total Shareholders' Funds

Total shareholders' funds increased to GBP91.4m (March 2019: GBP89.1m). The changes in equity reserves reflect the retained profit after tax for the year, currency movements on overseas asset and goodwill values, the addition of further share-based payment reserves and the payment of dividends. As at 31 March 2020, the Company had 103,607,638 ordinary shares in issue, of which no shares were held in treasury and 2,669,429 shares were held in the Company's employee benefit trust ("EBT") for satisfaction of future option vesting.

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 executive 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 current COVID-19 situation is a significant event that brings an unprecedented level of uncertainty to the business environment and a shifting business development landscape. Alpha took early decisive action in response to the pandemic, implementing protective measures in March to reduce costs and maintain liquidity. These measures included 40 per cent salary and fee reductions for the senior leadership team for six months, reducing recruitment to all but a handful of strategic hires, freezing annual salary increases globally and deferring the annual profit share payments for FY 20 to employees until later in FY 21. In April, the remainder of the global director team agreed to a voluntary 20 per cent temporary salary reduction and, in June, staff furlough plans have been cautiously introduced in the UK and France.

FY 21 trading has begun well and the Group continues to see opportunities, new client wins as well as extensions to existing projects. However, while the trading environment remains uncertain, Alpha will continue to monitor the COVID-19 situation closely; and will act sensitively and appropriately in managing the Group through uncertain times in the interests of all stakeholders.

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 cognizant 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 another year of strategic acquisitions, strong growth and cash generation in FY 20. While COVID-19 means that uncertainty exists over how the coming year will unfold, we start FY 21 well positioned.

John Paton

Chief Financial Officer

24 June 2020

(10) Organic revenue growth is an APM and represents FY 20 revenue less GBP7.3m revenue attributable to the Axxsys and Obsidian acquisitions completed during the year. Refer to note 3 for further detail of APMs

(11) H2 20 refers to the second half of the financial year ending 31 March 2020

Consolidated statement of comprehensive income

For the year ended 31 March 2020

 
                                                                                        Restated(12) 
                                                                         Year ended       Year ended 
                                                                      31 March 2020    31 March 2019 
                                                              Note          GBP'000          GBP'000 
 Continuing operations 
 
 Revenue                                                       2             90,901           77,661 
 Rechargeable expenses                                         2            (1,977)          (1,701) 
 
 
 Net fee income                                                2             88,924           75,960 
 Cost of sales                                                             (54,521)         (46,878) 
 
 
 Gross profit                                                                34,403           29,082 
 
 Administration expenses                                                   (23,977)         (16,510) 
 
 
 Operating profit                                                            10,426           12,572 
 
 
 Depreciation                                                  6              1,022              263 
 Amortisation of capital development costs                     10               428                - 
 Adjusting items                                               3              8,372            3,643 
 
 
 Adjusted EBITDA                                               3             20,248           16,478 
 
 
 Finance income                                                5                  1                - 
 Finance expense                                               5            (1,133)             (52) 
 
 
 Profit before tax                                                            9,294           12,520 
 
 Taxation                                                      7            (3,127)          (3,321) 
 
 
 Profit for the year                                                          6,167            9,199 
 
 
 Exchange differences on translation of foreign operations                    1,311            2,505 
 
 
 Total comprehensive income/(expense) for the year                            7,478           11,704 
 
 
 Basic earnings per ordinary share (p)                         9               6.11             9.05 
 
 Diluted earnings per ordinary share (p)                       9               5.85             8.84 
 
 

(12) Prior year restatement relates to the alignment of the Group's revenue recognition policy to IFRS 15 B35B, presenting revenue inclusive of expenses recharged to clients. This restatement has no impact on the Group's adjusted EBITDA, profit after tax or net asset positions as such rechargeable expenses are recharged with nil mark-up. Please see note 1 for further details

Consolidated statement of financial position

As at 31 March 2020

 
 
                                                      Year ended        Year ended 
                                                   31 March 2020     31 March 2019 
                                          Note           GBP'000           GBP'000 
 Assets 
 Non-current assets 
 Goodwill                                  10             64,553            55,162 
 Intangible fixed assets                   10             25,774            20,768 
 Property, plant and equipment                               530               414 
 Right-of-use asset                        6               2,611                 - 
 
 
 Total non-current assets                                 93,468            76,344 
 
 Current assets 
 Trade and other receivables               12             21,212            19,680 
 Cash and cash equivalents                                25,996            18,581 
 
 
 Total current assets                                     47,208            38,261 
 
 
 Current liabilities 
 Trade and other payables                  13           (25,929)          (18,427) 
 Corporation tax                                         (4,150)           (3,359) 
 Lease liabilities                         6               (791)                 - 
 Interest bearing loans and borrowings                   (5,000)                 - 
 
 
 Total current liabilities                              (35,870)          (21,786) 
 
 
 Net current assets                                       11,338            16,475 
 
 
 Non-current liabilities 
 Deferred tax provision                                  (4,438)           (3,193) 
 Other non-current liabilities             14            (7,104)             (486) 
 Lease liabilities                         6             (1,878)                 - 
 
 
 Total non-current liabilities                          (13,420)           (3,679) 
 
 
 Net assets                                               91,386            89,140 
 
 
 Equity 
 Issued share capital                      15                 78                76 
 Share premium                                            89,396            89,396 
 Capital redemption reserve                                    -                 1 
 Foreign exchange reserve                                  3,406             2,095 
 Other reserves                                            1,652               737 
 Retained earnings                                       (3,146)           (3,165) 
 
 
 Total Shareholders' equity                               91,386            89,140 
 
 
 

Consolidated statement of cash flows

For the year ended 31 March 2020

 
                                                                       Year ended      Year ended 
                                                                    31 March 2020   31 March 2019 
                                                                          GBP'000         GBP'000 
 Cash flows from operating activities: 
 Operating profit for the year                                             10,426          12,572 
 Depreciation of property, plant and equipment                              1,022             263 
 Loss on disposal of fixed assets                                              11               6 
 Amortisation of intangible fixed assets                                    3,804           2,586 
 Share-based payment charge                                                   917             436 
 Acquisition related costs                                                      -              61 
 
 
 Operating cash flows before movements in working capital                  16,180          15,924 
 
 Working capital adjustments: 
 (Increase)/decrease in trade and other receivables                            30           1,562 
 Increase/(decrease) in trade and other payables                            4,444             878 
 
 Tax paid                                                                 (2,446)         (1,996) 
 
 
 Net cash generated from operating activities                              18,208          16,368 
 
 Cash flows from investing activities: 
 Interest received                                                              1               - 
 Acquisition of subsidiaries, net of acquired cash                        (7,339)         (1,113) 
 Capitalised development costs                                            (1,387)               - 
 Additions to property, plant and equipment                                 (349)           (728) 
 
 
 Net cash used in investing activities                                    (9,074)         (1,841) 
 
 Cash flows from financing activities: 
 Issue of ordinary share capital                                              (1)               - 
 Repayment of borrowings                                                        -               - 
 Drawdown of bank borrowings                                                5,000               - 
 Interest paid                                                               (47)            (45) 
 Lease liability payments                                                   (835)               - 
 Dividends paid                                                           (6,256)         (5,687) 
 
 
 Net cash used in financing activities                                    (2,139)         (5,732) 
 
 
 Net increase in cash and cash equivalents                                  6,995           8,795 
 
 
 Cash and cash equivalents at beginning of the period                      18,581           9,774 
 Effect of exchange rate fluctuations on cash held                            420              12 
 
 
 Cash and cash equivalents at end of the period                            25,996          18,581 
                                                             ====================  ============== 
 

Consolidated statement of changes in equity

For the year ended 31 March 2020

 
                                                       Capital        Foreign 
                           Share          Share    redemp-tion       exchange        Other       Retained 
                         capital        premium        reserve       reserves     reserves       earnings        Total 
                         GBP'000        GBP'000        GBP'000        GBP'000      GBP'000        GBP'000      GBP'000 
 
 As at 1 April 2018           77         89,396              -          (410)          267        (6,677)       82,653 
 
 Comprehensive 
 income 
 Loss for the 
  period                       -              -              -              -            -          9,199        9,199 
 Foreign exchange 
  differences on 
  translation 
  of foreign 
  operations                   -              -              -          2,505            -              -        2,505 
 
 Transactions with 
  owners 
 Shares cancelled 
  (equity)                   (1)              -              1              -            -              -            - 
 Share-based 
  payment 
  reserves                     -              -              -              -          409              -          409 
 Consideration to 
  be settled in 
  equity                       -              -              -              -           61              -           61 
 Dividends                     -              -              -              -            -        (5,687)      (5,687) 
                     -----------  -------------  -------------  -------------  -----------  -------------  ----------- 
 As at 31 March 
  2019                        76         89,396              1          2,095          737        (3,165)       89,140 
                     -----------  -------------  -------------  -------------  -----------  -------------  ----------- 
 Effect of changes 
  in accounting 
  standard                     -              -              -              -            -            109          109 
                     -----------  -------------  -------------  -------------  -----------  -------------  ----------- 
 As at 1 April 2019           76         89,396              1          2,095          737        (3,056)       89,249 
 
 Comprehensive 
 income 
 Profit for the 
  period                       -              -              -              -            -          6,167        6,167 
 Foreign exchange 
  differences on 
  translation 
  of foreign 
  operations                   -              -              -          1,311            -              -        1,311 
                                                             - 
 Transactions with 
  owners 
 Shares issued 
  (equity)                     2              -            (1)              -            -            (1)            - 
 Share-based 
  payment 
  reserves                     -              -              -              -          917              -          917 
 Deferred tax 
  recognised 
  in equity                    -              -              -              -          (2)              -          (2) 
 Dividends                     -              -              -              -            -        (6,256)      (6,256) 
                     -----------  -------------  -------------  -------------  -----------  -------------  ----------- 
 As at 31 March 
  2020                        78         89,396              -          3,406        1,652        (3,146)       91,386 
                     ===========  =============  =============  =============  ===========  =============  =========== 
 
 

Share capital

Share capital represents the nominal value of share capital subscribed.

Share premium

The share premium account is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at a premium, net of associated share issue costs.

Capital redemption reserve

The capital redemption reserve is a non-distributable reserve into which amounts are transferred following the redemption or purchase of the Company's own shares.

Foreign exchange reserve

The foreign exchange reserve represents exchange differences that arise on consolidation from the translation of the financial statements of foreign subsidiaries, including goodwill.

Other reserves

The other reserves represent the cumulative fair value of the IFRS 2 share-based payment charge to be recognised each year and equity-settled consideration reserves.

Retained earnings

The retained earnings reserve represents cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

Notes to the consolidated financial statements

   1.   Basis of preparation and significant accounting policies 

The financial information set out in this financial results announcement does not constitute statutory

accounts as defined in section 435 of the Companies Act 2006. The consolidated statement of

comprehensive profit and loss and other comprehensive income, consolidated statement of financial

position, consolidated statement of change in equity, consolidated statement of cash flows and the

associated notes have been extracted from the Group's financial statements for the year ended 31 March 2020, upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2020 will be delivered to the Registrar of Companies following the Annual General Meeting.

These condensed preliminary financial statements for the year ended 31 March 2020 have been prepared on the basis of the accounting policies adopted by the Group upon admission to AIM. They are in accordance with the Group's accounting policies as set out in the historical financial information included in the Annual Report & Accounts 2018.

The recognition and measurement requirements of all International Financial Reporting Standards

("IFRSs"), International Accounting Standards ("IAS") and interpretations currently endorsed by the

International Accounting Standards Board ("IASB") and its committees, as adopted by the EU, and as required to be adopted by AIM listed companies, have been applied.

Going Concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group has adequate resources to continue in operation for the foreseeable future.

Impact of Coronavirus (COVID-19)

The Directors note that the World Health Organisation declared a pandemic relating to COVID-19 on 11 March 2020, and social distancing measures were introduced in key Alpha territories during March 2020. Therefore, the Directors have considered the significance of the economic ramifications of the virus before the end of the Group's financial year and its potential effect on the Group's financial statements for the year ended 31 March 2020. In particular, the Directors have assessed the impact of incorporating additional COVID-19 risk factors in the discount rates and medium- and long-term growth rates used in impairment testing of non-financial assets, as well as applying additional downside sensitivities in the Going Concern assessment over a period of 12 months after the signing of these financial statements.

Key assumptions considered by management when assessing going concern include adjusting managements best estimate of forecasted performance for factors including the length and extent of current lockdown restrictions, the resulting general business environment, the speed of recovery of trading after lockdown restrictions ease and utilisation of relevant government support schemes. These have been estimated for their respective impacts on the Group's revenues, fixed and variable costs and resultant expected cash flow requirements.

The Group's forecasts and projections, taking into account reasonable estimate of a possible downturn in trading performance arising from the COVID-19 outbreak, show that the Group has sufficient financial resources, both from the Group's robust balance sheet and its expected cash flow generation, sufficient for the going concern period. The Group do not believe that the COVID-19 outbreak represents a material uncertainty about the entity's ability to continue as a going concern. Accordingly, the Directors have adopted the going concern basis in preparing these consolidated financial statements.

Prior year adjustment - Revenue including rechargeable expenses

In line with IFRS 15 Para. B35B, revenue has been restated to be recognised on a gross basis and the fees and associated rechargeable expenses are disaggregated and shown separately. This change in presentation has arisen from the Group's reassessment of the principal versus agent considerations guidance in IFRS 15 with regard to rechargeable expenses arrangements, following a review letter from the Financial Reporting Council. This represents a prior year adjustment under 'IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors' and has been applied retrospectively from the earliest comparative period disclosed within these financial statements.

This change has no impact on the Company's profits or net asset position.

The impact of this change has been to increase revenue and rechargeable expenses by GBP2.0m in FY 20 and GBP1.7m in FY 19.

   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 & Asia. The Group's operations all consist of one type: consultancy and related services to the asset and wealth management industry.

The Directors consider that there is a material level of operational support and linkage provided to the Group's emerging territories in Asia and Europe as they develop their presence locally, and as such these clusters of territories 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 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.

 
 31 March 2020                      UK(13)    North America(14)            Europe &              Total 
                                                                           Asia(13) 
                            ==============  ===================  ==================  ================= 
                                   GBP'000              GBP'000             GBP'000            GBP'000 
                            ==============  ===================  ==================  ================= 
 Revenue                            51,391               15,222              24,288             90,901 
                            ==============  ===================  ==================  ================= 
 Rechargeable expenses               (864)                (786)               (327)            (1,977) 
                            --------------  -------------------  ------------------  ----------------- 
 Net income(15)                     50,527               14,436              23,961             88,924 
                            ==============  ===================  ==================  ================= 
 Cost of sales                    (28,247)              (9,672)            (16,602)           (54,521) 
                            --------------  -------------------  ------------------  ----------------- 
 Gross profit                       22,280                4,764               7,359             34,403 
                            ==============  ===================  ==================  ================= 
 Margin on net fee 
  income(16) (%)                     44.1%                33.0%               30.7%              38.7% 
                            --------------  -------------------  ------------------  ----------------- 
 Net assets                         53,740                9,556              28,090             91,386 
                            ==============  ===================  ==================  ================= 
 
 31 March 2019 (restated)           UK(13)    North America(14)            Europe &              Total 
                                                                           Asia(13) 
                                   GBP'000              GBP'000             GBP'000            GBP'000 
                            ==============  ===================  ==================  ================= 
 Revenue                            46,137                9,879              21,645             77,661 
                            ==============  ===================  ==================  ================= 
 Rechargeable expenses               (796)                (707)               (198)            (1,701) 
                            --------------  -------------------  ------------------  ----------------- 
 Net income(15)                     45,341                9,172              21,447             75,960 
                            ==============  ===================  ==================  ================= 
 Cost of sales                    (25,594)              (7,514)            (13,770)           (46,878) 
                            --------------  -------------------  ------------------  ----------------- 
 Gross profit                       19,747                1,658               7,677             29,082 
                            ==============  ===================  ==================  ================= 
 Margin on net fee 
  income(16) (%)                     43.6%                18.1%               35.8%              38.3% 
                            --------------  -------------------  ------------------  ----------------- 
 Net assets                         60,184                6,258              22,698             89,140 
                            ==============  ===================  ==================  ================= 
 
 

During the year, the Group had no customers that comprised more than 10% of the Group's revenues, with the largest customer comprising 8.0%. One customer contributed GBP8.1m, or 10.4% of Group revenues in FY 19. The largest customer was different in each of FY 19 & FY 20.

The Group's central net assets have been allocated to the UK operating segment, with the exception on goodwill balances, which have been allocated to operating segments in line with note 10.

(13) Alpha Data Solutions ("ADS") revenue, previously shown within Europe & Asia, in the current year is included in the UK segment in line with the ADS business growth and focus. To allow for easier comparison, this has been restated in the comparative period. Within Europe & Asia, France is a material entity and generated profits after tax of GBP1.1m (FY 19: GBP1.9m) and revenue of GBP11.2m (FY 19: GBP12.1m)

(14) North America replaces previously used "US" as a geographic segment, taking into consideration an office in Canada through the acquisition by the Group of Axxsys

(15) Net fee income is revenue stated before incidental expenses recharged to clients. As noted in note 1, the Group has aligned to IFRS 15 para B35B to show revenue on a gross basis including these associated rechargeable expenses. The Directors assess performance across the Group before such rechargeable expenses as it is considered that this alternative performance measure better indicates the underlying productive operating performance of the Group. Further detail is set out in note 3

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

   3.   Reconciliations to Alternative Performance Measures ("APMs") 

Alpha uses APMs, which are not defined or specific under the requirements of IFRS. The APMs, including net fee income, margin on net fee income, adjusted profit before tax, adjusted operating profit, adjusted EBITDA, adjusted cash conversion and organic growth, are provided to allow stakeholders a further understanding of the underlying trading performance of the Group and aid comparability between accounting periods and are not considered a substitute 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 net fee income by segment is reconciled to revenue in note 2.

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

 
                                                                  FY 20                 FY 19 
                                            Note                GBP'000               GBP'000 
 
 Profit before tax                                                9,294                12,520 
 
 Amortisation of acquired intangible 
  assets                                     10                   3,376                 2,586 
 Loss on disposal of fixed assets                                    11                     6 
 Share-based payments charge                 16                   1,307                   872 
 Earn-out & deferred consideration           11                   2,761                   295 
 Acquisition costs                                                  488                     - 
 Integration costs                                                  509                     - 
 Foreign exchange (gains)/losses                                   (80)                 (116) 
                                                  ---------------------  -------------------- 
 Adjusting items                                                  8,372                 3,643 
 Non-underlying finance expenses             5                      951                     - 
 
 Adjusted profit before tax                                      18,617                16,163 
 Net underlying finance expenses             5                      181                    52 
 
 
 Adjusted operating profit                                       18,798                16,215 
 Depreciation of plant and equipment                              1,022                   263 
 Amortisation of capitalised development 
  costs                                      10                     428                     - 
 
 Adjusted EBITDA                                                 20,248                16,478 
                                                  =====================  ==================== 
 Adjusted EBITDA margin (%)                                       22.8%                 21.7% 
                                                  ---------------------  -------------------- 
 
 

Adjusted EBITDA

Adjusted EBITDA is a commonly used operating measure, which is defined by the Group as earnings stated before non-cash items including intangible asset amortisation, depreciation, net finance expenses and other non-operating expenses. Adjusted EBITDA is a measure that is used by management and the Board to assess trading performance across the Group and forms the basis of the performance measures for aspects of remuneration, including consultant profit share.

Adjusted EBITDA also excludes the employee share-based payments charge and related social taxes. This allows comparability between periods as the Group's share option plans were established on AIM admission, aligns more closely with the operational activities of the business, the charge is a non-cash item, and the estimated future social taxes payable fluctuate with the future market value of shares. This has been applied consistently across reporting periods. Note 16 sets out further details of the employee share-based payments expense calculation under IFRS 2.

As per note 11, the acquisition of Axxsys and Obsidian in the current year involved deferred contingent and non-contingent consideration payments, which, in accordance with IFRS 3, will be expensed annually, for several years, dependent on the ongoing employment of the respective vendors. This cost has been removed to calculate adjusted EBITDA as, whilst it will recur in the short term, it represents additional payments linked to these acquisitions and not operational performance. In the prior period, the employment-linked deferred consideration relating to the acquisition of TrackTwo was similarly adjusted.

Similarly, the impact of foreign currency volatility in translating to the underlying trading of the Group to the Group's functional currency has been excluded from the calculation of adjusted EBITDA on the basis that such exchange rate movements do not reflect the underlying trends or operational performance of the Group.

Other acquisition costs expensed in the current year, relating to the Axxsys and Obsidian acquisitions, have also been excluded from adjusted EBITDA as they are not directly attributable to the ongoing trading performance of the Group. This is consistent with other acquisition and the AIM admission costs excluded in previous years.

Integration costs, to align the acquired Obsidian product suite security and to integrate the technology protocols with the ADS 360 SalesVista product, directly result from the acquisition and have been managed as a discrete short-term project subsequent to the acquisition to early FY 21. These costs are excluded to allow clarity on the underlying operational performance of the Group between periods.

Adjusted EBITDA is also shown under IAS 17, which preceded the IFRS 16 Leases accounting standard. This allows comparability between accounting periods as IFRS 16 was adopted in the current year on a modified retrospective approach. A further reconciliation is set out in note 6. Adjusted EBITDA margin is noted below.

Reconciliation of underlying administrative expenses

 
                                                                  FY 20                 FY 19 
                                            Note                GBP'000               GBP'000 
 
 Administrative expenses                                         23,977                16,510 
 
 Adjusting items                                                (8,372)               (3,643) 
 Depreciation of plant and equipment                            (1,022)                 (263) 
 Amortisation of capitalised development 
  costs                                      10                   (428)                     - 
 
 
 Adjusted administrative expenses                                14,155                12,604 
 
 Lease liability payments                    6                      835                     - 
 
 
 IAS 17 adjusted administrative expenses                         14,990                12,604 
 
 
 

Adjusted Group administrative expenses are administrative expenses excluding adjusting items, depreciation and amortisation of capitalised development costs and is used by the Board to monitor the underlying administrative costs of the business. IAS 17 adjusted Group administrative expenses excludes lease liability payments, which are not recorded as administrative expenses under IFRS 16 to allow comparability between periods. On a comparable basis, underlying administrative expenses grew 18.9% to GBP15m.

Adjusted profit before tax

Adjusted profit before tax is an alternative performance measure that allows comparability of the Group's underlying performance following its modified retrospective adoption of IFRS 16 (see note 6). Lease asset depreciation and related finance expenses are included within adjusted profit before tax. This measure also reflects the increased underlying amortisation charges arising from the recently capitalised costs of ADS product development. This measure should be of increasing importance to allow comparability across periods as the ADS business grows further in future years.

In addition to these adjustments to administrative expenses, the related unwinding of the discounted contingent and non-contingent acquisition consideration within finance expenses is also considered a non-operating adjusting item to adjusted profit before tax.

Reconciliation to adjusted profit after tax and adjusted EPS

 
                                             FY 20     FY 19 
                                           GBP'000   GBP'000 
 
 Adjusted profit before tax                 18,617    16,163 
 
 Tax charge                                (3,127)   (3,321) 
 Tax impact of adjusting items             (1,142)     (602) 
 
 
 Adjusted profit after tax                  14,348    12,240 
                                  ================  ======== 
 

Adjusted profit after tax and adjusted earnings per share metrics are further alternative performance measures, 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.

 
                                    Year ended            Year ended 
 Adjusted EPS                         31 March              31 March 
                                          2020                  2019 
 
 Adjusted EPS (p)                        14.21                 12.05 
 Adjusted diluted EPS (p)                13.62                 11.77 
 

Adjusted EPS is calculated by dividing the adjusted profit after tax for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Adjusted diluted EPS is calculated by dividing adjusted profit after tax by number of shares as above, adjusted for the impact of potential ordinary shares. Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease EPS (or increase loss per share). Refer to note 9 for further detail.

Profit margins

Margin on net fee income and adjusted EBITDA margins are calculated using gross profit and adjusted EBITDA 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.

Profits and margins without IFRS 16 are also shown within the Chief Financial Officer's Report to allow better comparability between years, as IFRS 16 was adopted on a modified retrospective basis.

Adjusted cash conversion

 
                                                         FY 20     FY 19 
                                                       GBP'000   GBP'000 
 
 Net cash generated from operating activities           18,208    16,368 
 
 Employment-linked acquisition payments                  1,200         - 
 Acquisition costs                                         488         - 
 
 Adjusted cash generated from operating activities      19,896    16,368 
                                                      --------  -------- 
 

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, in order to exclude the effect of cash payments relating to acquisitions from underlying operating performance.

 
                                      FY 20   FY 19 
 
 Cash conversion                       175%    130% 
 Adjusted cash conversion              106%    101% 
 

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.

Organic growth

Organic revenue growth of 7.7% for the current year represents FY 20 revenue less GBP7.3m revenue attributable to the acquisitions 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 minimal impact on both net fee income and profits in FY 20, as a result of a flat average sterling, against key currencies. In the year, sterling averaged $1.28 (FY 19: $1.31) and EUR1.15 (FY 19: EUR1.13). Currency translation immaterially increased FY 20 net fee income by GBP0.3m (0.4%).

   4.   Staff costs 

The average number of employees employed by the Group, where "employees" includes Executive Directors but excludes contractors, was:

 
                     FY 20    FY 19 
                    Number   Number 
 
 UK                    174      145 
 North America          53       49 
 Europe & Asia         128      110 
 Administration         42       32 
 
 
                       397      336 
                   =======  ======= 
 
 
                                  FY 20     FY 19 
                                GBP'000   GBP'000 
 
 Wages and salaries              42,178    35,638 
 Social security costs            5,076     4,083 
 Pension costs                      952       453 
 Share-based payment charge       1,307       872 
 
 
                                 49,513    41,046 
                               ========  ======== 
 

The share-based payment charge, including social security taxes, in respect of key management personnel was GBP136,000 (FY19: GBP79,000).

   5.   Finance income and expenses 
 
                                                    FY 20         FY 19 
                                                  GBP'000       GBP'000 
 
 Bank interest receivable                               1             - 
                                                 ========      ======== 
 
 Interest payable on bank loans and overdraft        (53)          (52) 
 Interest on lease liabilities (note 6)             (129)             - 
 
 Total underlying finance expenses                  (182)          (52) 
 Net underlying finance expenses (note 3)           (181)          (52) 
 Non-underlying finance expenses (note 3)           (951)             - 
 
 Total finance expenses                           (1,133)          (52) 
                                                 ========      ======== 
 
 
   6.   Leases 

The Group has adopted IFRS 16 Leases during the year using the Modified Retrospective approach. This new accounting standard replaces accounting treatment for leases previously depicted in IAS 17. IFRS 16 introduced a single lessee accounting model whereby a lessee is required to recognise a right -- of -- use asset and a lease liability for all leases with a term of more than 12 months.

 
 Right-of-use assets       Buildings      Equipment               Total 
                                        under lease 
                         ===========  =============  ================== 
                             GBP'000        GBP'000             GBP'000 
                         ===========  =============  ================== 
 Cost 
 At 1 April 2019               2,886             11               2,897 
 Additions                       377              -                 377 
 Disposals and other               -              -                   - 
  movements 
 Cost of sales                   101              -                 101 
                         -----------  -------------  ------------------ 
 At 31 March 2020              3,364             11               3,375 
                         ===========  =============  ================== 
 
 Depreciation 
 At 1 April 2019                   -              -                   - 
 Charge for the period         (760)            (4)               (764) 
 Cost of sales                     -              -                   - 
                         -----------  -------------  ------------------ 
 At 31 March 2020              (760)            (4)               (764) 
                         -----------  -------------  ------------------ 
 Net book value at 31 
  March 2020                   2,604              7               2,611 
                         ===========  =============  ================== 
 

A summary of the Group's lease liabilities as at 31 March 2020 is presented below:

 
                             31 March 2020   1 April 2019 
                                   GBP'000        GBP'000 
 
 Current                               791            228 
 Non-current                         1,878          2,669 
 
 
 Total lease liabilities             2,669          2,897 
                            ==============  ============= 
 

Interest expense recognised in the year arising from the above lease liabilities amounted to GBP0.1m.

The income statement records, within operating profit, GBP0.6m relating to leases not within the scope of IFRS 16, such as leases with a remaining lease term of less than 12 months as at 1 April 2019 as "short-term leases", and those with a low value as "low value leases". Variable service charge costs associated with the Group's property leases represent future outflows relating to the lease arrangements are also not included within the IFRS 16 lease liability. These currently amount to GBP0.1m per annum and are expensed as incurred.

The Group has no income associated with sub-leasing arrangements, or gains/losses associated with sale-and-leaseback transactions in the current year.

In order to aid comparability between periods, the table below shows the income statement captions to 31 March 2020 as if IFRS 16 had not been adopted:

 
                                                     FY 20        IFRS 16                 FY 20 
                                                 under IAS    adjustments            under IFRS 
                                                        17                                   16 
                                                   GBP'000        GBP'000               GBP'000 
 Continuing operations 
 
 Revenue                                            90,901              -                90,901 
 Rechargeable expenses                             (1,977)              -               (1,977) 
 
 
 Net fee income                                     88,924              -                88,924 
 Cost of sales                                    (54,521)              -              (52,521) 
 
 
 Gross profit                                       34,403              -                34,403 
 
 Administration expenses                          (24,048)             71              (23,977) 
 
 
 Operating profit                                   10,355             71                10,426 
 
 
 Depreciation                                          258            764                 1,022 
 Amortisation of capital development 
  costs                                                428              -                   428 
 Adjusting items                                     8,372              -                 8,372 
 
 
 Adjusted EBITDA                                    19,413            835                20,248 
 
 
 Net finance expenses                              (1,003)          (129)               (1,132) 
 
 
 Profit before tax                                   9,352           (58)                 9,294 
 
 
   7.   Taxation 
 
                                                        FY 20                FY 19 
                                                      GBP'000              GBP'000 
 Current tax 
 In respect of the current year                         2,473                2,433 
 Adjustment in respect of prior periods                 (372)                (274) 
 Foreign taxation                                       1,243                1,397 
 
 Deferred tax 
 In respect of the current year                         (829)                (460) 
 Change in tax rate                                       426                   13 
 Adjustment in respect of prior periods                   186                  212 
 
 
 Total tax expense for the year                         3,127                3,321 
                                          ===================  =================== 
 
 
 

The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:

 
                                                            FY 20                  FY 19 
                                                          GBP'000                GBP'000 
 
 Profit/(loss) before taxation                              9,294                 12,520 
 
 
 Tax on profit on ordinary activities at 
  standard UK corporation tax rate of 19% 
  (2019: 19%)                                               1,766                  2,381 
 
 Effects of: 
 Fixed asset differences                                      (1)                      3 
 Expenses not deductible for taxation                       1,042                     99 
 Income not taxable for tax purposes                            -                      - 
 Differences due to overseas tax rates                         74                    887 
 Adjustments in respect of prior periods                    (372)                  (274) 
 Adjustments in respect of prior periods 
  - deferred tax                                              186                    212 
 Change in deferred tax rate                                  406                     13 
 Deferred tax not recognised                                   26                      - 
 
 
 Total tax expense for the year                             3,127                  3,321 
                                            =====================  ===================== 
 
 

Expenses not deductible for taxation relate mainly to employment-linked acquisition consideration, treated as capital for tax purposes.

   8.   Dividends 
 
                                                             FY 20             FY 19 
                                                           GBP'000           GBP'000 
 Amounts recognised as distributions to 
  equity holders: 
 Interim dividend for the year ended 31 
  March 2020 of 2.10p (FY 19: 1.91p) per 
  share                                                      2,121             1,938 
 No proposed final dividend for the year 
  ended 31 March 2020 (FY 19: 4.09p) per 
  share                                                          -             4,135 
                                                ------------------  ---------------- 
 
   Total dividend for the year ended 31 March 
   2020 of 2.10p (FY 19: 6.00p) per share                    2,121             6,073 
                                                ==================  ================ 
 

The Directors have not proposed a final dividend for the year ended 31 March 2020.

   9.   Earnings per share and adjusted earnings per share 

The Group presents basic and diluted EPS data, both adjusted and non-adjusted for its ordinary shares. Basic EPS is calculated by dividing the profit or loss for the period attributable to ordinary shareholders by the weighted average number of ordinary shares fully outstanding during the period. 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 period, the same adjustments as in note 3 have been made to the Group's profit for the financial period. The profits and weighted average number of shares used in the calculations are set out below:

 
                                                             Year ended               Year ended 
                                                               31 March                 31 March 
                                                                   2020                     2019 
 Basic & diluted EPS 
 Profit/(loss) for the financial year used 
  in calculating basic and diluted EPS (GBP'000)                  6,167                    9,199 
 Weighted average number of ordinary shares 
  in issue ('000)                                               101,003                  101,604 
 Number of dilutive shares ('000)                                 4,341                    2,416 
 
  Weighted average number of ordinary shares, 
  including potentially dilutive shares 
  ('000)                                                        105,344                  104,020 
 Basic EPS (p)                                                     6.11                     9.05 
 Diluted EPS (p)                                                   5.85                     8.84 
 
 
 Adjusted EPS 
 
 Adjusted profit for the financial year 
  used in calculating adjusted basic and 
  diluted EPS (note 3) (GBP'000)                             14,348                 12,240 
 Weighted average number of ordinary shares 
  in issue ('000)                                           101,003                101,604 
 Number of dilutive shares ('000)                             4,341                  2,416 
 
   Weighted average number of ordinary shares, 
   including potentially dilutive shares 
   ('000)                                                   105,344                104,020 
 Adjusted EPS (p)                                             14.21                  12.05 
 Adjusted diluted EPS (p)                                     13.62                  11.77 
 

Earnings per share is calculated based on the share capital of the Company and the earnings of the Group.

10. Goodwill and intangible fixed assets

Goodwill

 
                                            31 March 2020   31 March 2019 
                                                  GBP'000         GBP'000 
 
 Cost at beginning of the year                     55,162          52,626 
 Additions                                          8,469               - 
 Gains/(losses) from foreign exchange                 922           2,536 
 
 
 Cost at end of the year                           64,553          55,162 
                                         ================  ============== 
 

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is represented by assets that do not qualify for separate recognition and includes the potential synergy benefits of combining the intellectual property and talents of the teams into the Group.

In prior years, goodwill was recognised upon the acquisitions of Alpha FMC Group Holdings Limited by Alpha Financial Markets Consulting plc in February 2016 and TrackTwo GmbH in July 2017, and is the difference between the consideration paid and the fair value of assets acquired and liabilities assumed.

In the current year, goodwill additions have been as a result of the acquisitions of Axxsys Limited and its subsidiaries and Obsidian Solutions Limited, adding GBP2.6m and GBP5.8m goodwill respectively.

In line with IAS 36, the carrying value of goodwill is not subject to systematic amortisation but is reviewed at least annually for impairment. The review assesses each cash-generating unit ("CGU") to which goodwill has been allocated for impairment, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. The carrying values of goodwill have been assessed by reference to value in use. These have been estimated using cash flows from the most recent forecasts prepared by management.

The cash generating units that have been classified in line with our operating segments, driven by shared senior management at a strategic and local operational level. Therefore, the CGUs considered for impairment testing are UK, North America and Europe & Asia, in line with our operating segments. The Directors consider that there is also a material level of operational support and linkage provided to the Group's emerging territories in Asia and Europe as they develop their presence locally, and as such these clusters of territories have been assessed as constituting one CGU for impairment purposes. The goodwill allocated to the CGU's as follows:

 
 Goodwill by cash-generating unit                                   Restated(17) 
                                             31 March 2020         31 March 2019 
                                                   GBP'000               GBP'000 
 
 UK                                                 38,902                32,338 
 North America                                       8,487                 7,790 
 Europe & Asia                                      17,164                15,034 
 
 
 At end of the year                                 64,553                55,162 
                                          ================       =============== 
 

(17) Alpha Data Solutions ("ADS") goodwill, previously shown within Europe & Asia, in the current year is included in the UK segment in line with the ADS business growth and focus. To allow for easier comparison, this has been restated in the comparative period

Intangible fixed assets

 
 As at 31 March 
  2020 
                         Order          Customer   Intellectual     Trade     Capitalised      Total 
                       backlog    relationshi-ps       property      name    developme-nt 
                                                                                    costs 
                                         GBP'000        GBP'000   GBP'000         GBP'000    GBP'000 
 
 Cost 
 At the start 
  of the year                -            20,068          2,086     5,630             441     28,225 
 Recognised on 
  acquisitions 
  (see note 11)          1,308             4,211          1,302       602               -      7,423 
 Additions                   -                 -              -         -           1,387      1,387 
 
 At the end of 
  the year - total       1,308            24,279          3,388     6,232           1,828     37,035 
 
 Amortisation 
 At the start 
  of the year                -           (5,234)          (759)   (1,414)            (50)    (7,457) 
 Charge for the 
  year                   (635)           (1,967)          (389)     (385)           (428)    (3,804) 
 
 At the end of 
  the year - total       (635)           (7,201)        (1,148)   (1,799)           (478)   (11,261) 
 Net book value            673            17,078          2,240     4,433           1,350     25,774 
 
 
 
 
 
 As at 31 March 
  2019 
                            Customer   Intellectual     Trade    Capitalised     Total 
                       relationships       property      name    development 
                                                                       costs 
                             GBP'000        GBP'000   GBP'000        GBP'000   GBP'000 
 
 Cost 
 At the start of 
  the year                    20,068          2,086     5,630              -    27,784 
 Additions                         -              -         -            441       441 
 
 At the end of the 
  year - total                20,068          2,086     5,630            441    28,225 
 
 Amortisation 
 At the start of 
  the year                   (3,442)          (499)     (930)              -   (4,871) 
 Charge for the 
  year                       (1,792)          (260)     (484)           (50)   (2,586) 
 
 At the end of the 
  year - total               (5,234)          (759)   (1,414)           (50)   (7,457) 
Net book value                14,834          1,327     4,216            391    20,768 
 
 
 

Customer relationships

Customer relationships at the start of the period represent the fair value at the 3 February 2016 acquisition date of the customer relationships which were owned by, but not previously recognised as assets of, Alpha FMC Group Holdings Limited and customer relationships acquired as part of the TrackTwo GmbH acquisition in July 2017.

Current year additions relate to the fair value of customer relationships from the acquisition of Axxsys Limited and Obsidian Solutions Limited. Refer to note 11 for further details.

The fair value has been determined by applying the Multi-Period Excess Earnings method to the cash flows expected to be earned from customer relationships. The key management assumptions are around forecast revenues, operating margins and discount factors. The value is given by the present value of the earnings the customer relationships generate, net of a reasonable return on other assets also contributing to that stream of earnings (contributory asset charges).

A useful economic life of 11-17 years has been deemed appropriate based on the average realisation rate of cumulative cash flows and benchmarked data for each respective acquisition. Projected cash flows have been discounted over this period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income.

Intellectual property

Intellectual property at the start of the period represents the fair value at the 3 February 2016 acquisition date of the intellectual property which was owned by, but not previously recognised as assets of, Alpha FMC Group Holdings Limited, and intellectual property acquired as part of the TrackTwo GmbH acquisition in July 2017.

Current year additions relate to the fair value of intellectual property acquired from Axxsys Limited and Obsidian Solutions Limited. Refer to note 11 for further details.

The fair value has been determined by applying the Relief from Royalty method to the cash flows earned from the intellectual property. The key management assumptions are around growth forecasts, discount factors and royalty percentage utilised. A useful economic life of 7 years has been deemed appropriate based on previous acquisitions and benchmarking data. Projected cash flows have been discounted over this period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income.

Trade name

Trade name intangible assets at the start of the period represent the fair value at the 3 February 2016 acquisition date of the trade name, which was owned by, but not previously recognised as assets of, Alpha FMC Group Holdings Limited, and the acquired intangible asset associated with the TrackTwo GmbH acquisition in July 2017.

Current year additions relate to the fair value of the trade names acquired from Axxsys Limited and Obsidian Solutions Limited. Refer to note 11 for further details.

The fair value has been determined by applying the Relief from Royalty method to the cash flows earned from the trade name. The key management assumptions are around growth forecasts, discount factors and royalty percentage utilised. A useful economic life of 10-15 years has been deemed appropriate based on previous acquisitions and benchmarking data. Projected cash flows have been discounted over this period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income.

Order backlog

The order backlog intangible additions in the current year relate to the fair value of the order backlog acquired with Axxsys. The fair value has been determined by applying the Relief from Royalty method to the cash flows earned from the order backlog. The key management assumptions are around growth forecasts, discount factors and royalty percentage utilised.

A useful economic life of 1-2 years has been deemed appropriate based on benchmarking reviews. Projected cash flows have been discounted over this period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income.

The remaining useful economic lives of each of the respective asset classes acquired on acquisition above are summarised in the table below.

 
Acquired Entity                             Customer     Intellectual   Trade     Order 
                                          Relationships    Property      Name     Backlog 
                                             (years)        (years)     (years)   (years) 
Alpha FMC Group Holdings                      7.8            2.8         10.8 
TrackTwo GmbH                                 8.3            4.3         14.2 
Axxsys Limited - UK                           10.2           0.2         14.2      0.2 
Axxsys Limited - North America/Nordics        11.2           0.2         14.2    0.2-1.2 
Obsidian Solutions Limited                    16.6           6.6         9.6 
 

Capitalised development costs

Capitalised development costs represent the costs incurred in the development enhancements to the 360 SalesVista software product within Alpha Data Solutions.

A useful economic life of 3 years has been deemed appropriate based on expected project lifecycle in development of new software.

The amortisation charge is recognised in administrative expenses within the statement of comprehensive income. There is an average of 2.6 years remaining to be amortised for the capitalised development costs in relation to the development of new software.

11. Acquisition of business

Acquisitions in the period

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 management consultancy and technology implementation services to the investment management industry since 2003.

The Group acquired Axxsys for GBP9 million cash in base consideration, payable partly on completion and also in non-contingent instalments over the two years following acquisition, plus an earn-out, which may be become payable in cash after the third anniversary of completion, contingent on Axxsys meeting certain earnings growth targets. The maximum earn-out payable is GBP5 million.

Of the GBP9m base consideration, GBP4.8m was paid during the year, of which GBP1.2m was employment-linked. The remaining GBP4.2m base consideration is due across the first and second anniversaries of the acquisition. Including the contingent earn-out and unwinding of discounting, a total GBP6.2m estimated consideration is recorded within liabilities, GBP1.9m in current liabilities and GBP4.3m in non-current liabilities. Any remaining employment-linked balance due will be expensed in the income statement per IFRS 3 proportionately until 2022.

The earn-out payments have been estimated by the Directors based on anticipated future earnings and discounted to current values. The unwinding of this earn-out discount annually shall be recognised as a finance cost, refer note 5. During the year, GBP0.6m of this discount unwinding was expensed in the year as a non-underlying cost in relation to Axxsys. Given this expense includes estimation, were assumptions adjusted for performance to be 10% better than anticipated, the earn-out related expense for the year would increase by GBP0.1m, or if performance was 10% worse than anticipated, the earn-out related expense for the year would decrease by GBP0.3m.

Axxsys contributed GBP7.1m to the Group's revenue and GBP1.4m to the Group's profit before tax for the period from the date of acquisition to 31 March 2020. If the acquisition of Axxsys had been completed on 1 April 2019, Group revenues for the period would have been GBP92.1m and Group profits before tax would have been GBP10.9m.

 
Axxsys Limited                              Fair value           Values 
                                    Book   adjustments   on acquisition 
                                  values 
                                 GBP'000       GBP'000          GBP'000 
 
  Acquiree's net assets at the 
  acquisition date: 
Tangible fixed assets                 30             -               30 
Customer relationships                 -         4,067            4,067 
Order backlog                          -         1,308            1,308 
Trade name                             -           284              284 
Trade and other debtors            1,572             -            1,572 
Cash                                 374             -              374 
Trade and other creditors        (1,220)             -          (1,220) 
Deferred tax liability                 -       (1,166)          (1,166) 
 
 Net identifiable assets and 
 liabilities acquired                756         4,493            5,249 
 
Cash consideration relating 
 to business combination                                          7,890 
 
 
Goodwill on acquisition (see 
 note 10)                                                         2,641 
 
 

Obsidian

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

Of the GBP5.9m base consideration, GBP4.2m was paid on completion of the Obsidian acquisition. The remaining GBP1.7m base consideration is due six months from the date of acquisition. Including the contingent earn-out and unwinding of discounting, a total GBP4.3m estimated consideration is recorded within liabilities of which GBP1.7m is recorded in current liabilities and GBP2.6m contingent estimated earn-out consideration is recorded in non-current liabilities. Any remaining employment related balance will be expensed through the income statement per IFRS 3 proportionately until 2023.

The earn-out payments have been estimated by the Directors based on anticipated future earnings and discounted to current values. The unwinding of this earn-out discount annually shall be recognised as a finance cost, refer note 5. During the year, GBP0.4m of this discount unwinding was expensed in the year as a non-underlying cost in relation to Obsidian. Given this expense includes estimation, the value may be subject to change. As the maximum earn-out has been assumed, if performance were to be 10% worse than anticipated, the earn-out related expense for the year would decrease by GBP0.2m.

Obsidian contributed GBP0.2m to the Group's revenue and GBP0.2m loss to the Group's profit before tax for the period from the date of acquisition to the 31 March 2020. If the acquisition of Obsidian had been completed on 1 April 2019, Group revenues for the period would have been GBP91.5m and Group profit before tax would have been GBP9.4m.

 
Obsidian Solutions Limited                  Fair value           Values 
                                    Book   adjustments   on acquisition 
                                  values 
                                 GBP'000       GBP'000          GBP'000 
 
  Acquiree's net assets at the 
  acquisition date: 
Tangible fixed assets                  6             -                6 
Customer relationships                 -           146              146 
Trade name                             -           318              318 
Intellectual property                  -         1,302            1,302 
Trade and other debtors              501             -              501 
Cash                                 155             -              155 
Trade and other creditors          (149)             -            (149) 
Deferred tax liability                 -         (300)            (300) 
 
 Net identifiable assets and 
 liabilities acquired                513         1,466            1,979 
 
Cash consideration relating 
 to business combination                                          7,807 
 
 
Goodwill on acquisition (see 
 note 10)                                                         5,828 
 
 

These acquisitions have been accounted for under the acquisition method of accounting. The fair value adjustments relate to the identification of separately identifiable intangibles and associated deferred tax liabilities. For the remaining assets and liabilities acquired, no fair value adjustments were identified. The tables above set out the book and fair values of the identifiable assets and liabilities acquired. Goodwill represents the excess of the cost of the acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiaries at the date of acquisition.

Acquisitions in prior periods

As part of the acquisition of TrackTwo GmbH in 2017, the Group agreed an earn-out arrangement and a final ownership consideration based on the financial performance of TrackTwo over the 3-year period to July 2020, subject to continuous employment of the vendor until July 2020, as previously disclosed. In the current year, the Group has netted off GBP0.2m within the earn-out and deferred consideration charge relating to amounts previously provided for these consideration arrangements, to reflect the expected final payment in July 2020.

The below table summarises the deferred and contingent consideration balances in relation to acquisitions held within current and non-current liabilities as at 31 March 2020:

 
                              Current  Non-current                 Total 
                              GBP'000      GBP'000               GBP'000 
 
Axxsys Limited                  1,890        4,294                 6,184 
Obsidian Solutions Limited      1,709        2,570                 4,279 
TrackTwo GmbH                     100            -                   100 
                                3,699        6,864                10,563 
 
 

12. Trade and other receivables

 
                                                    FY 20                 FY 19 
                                                  GBP'000               GBP'000 
Amounts due within one year: 
 
 Trade receivables                                 19,420                17,086 
Less: allowance for expected credit 
 losses                                             (523)                 (447) 
 
 
Trade receivables - net                            18,897                16,639 
 
  Other debtors                                       101                   589 
Prepayments                                           926                   912 
Accrued income                                      1,288                 1,540 
 
Total amounts due within one year                  21,212                19,680 
 

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.

An expected credit loss attributable to trade receivables is established after consideration of historical loss rates in preceding periods and relevant current circumstances. The Group has determined historical loss rates for each aging category of trade receivables by performing an in-depth analysis of historical losses.

The Group has considered macroeconomic factors, including the impact of the outbreak of COVID-19 and the ongoing uncertainty over Brexit on the expected credit loss rates applied to each aging category. The Group has also considered asset specific indicators such as customer correspondence, default or delinquency in payment and significant financial difficulties of the customer in determining the credit risk adjustment applied to each category for the year ended 31 March 2020.

 
At 31 March   Expected Loss  Gross Carrying  Loss Allowance  Net Carrying 
 2020                  Rate          Amount                        Amount 
                          %         GBP'000         GBP'000       GBP'000 
<31 days              1.60%          11,787           (189)        11,598 
31-60 days            2.08%           5,332           (111)         5,221 
61-90 days            4.16%             913            (38)           875 
91-120 days           7.59%             293            (22)           271 
121+ days            14.91%           1,095           (163)           932 
                                     19,420           (523)        18,897 
 
 
At 31 March   Expected Loss  Gross Carrying  Loss Allowance  Net Carrying 
 2019                  Rate          Amount                        Amount 
                          %         GBP'000         GBP'000       GBP'000 
<31 days              1.33%           8,228           (110)         8,118 
31-60 days            1.39%           5,770            (80)         5,690 
61-90 days            2.99%             914            (27)           887 
91-120 days           1.00%              88             (1)            87 
121+ days            11.00%           2,086           (229)         1,857 
                                     17,086           (447)        16,639 
 

The movement in the Group's allowance for expected credit losses in the year is summarised below:

 
Allowance for expected credit losses:                         FY 20     FY 19 
                                                            GBP'000   GBP'000 
 
At 1 April                                                      447       446 
Charge for the period                                            76         1 
Uncollected amounts written off, net of recoveries                -         - 
 
 
As at 31 March                                                  523       447 
                                                      =============  ======== 
 

Contract assets are recognised in accrued income and relate to satisfied performance obligations recognised and not invoiced at the year end. All such contract assets are expected to be realised within one year and classified within current assets. Contract assets are recorded on a time spent basis based and as performance obligations are met on agreed fees and day rates, billed in arrears. These are typically short-term timing differences and administrative in nature at each year end date. Contract asset payments are due on standard terms once the invoices are raised. The contract assets movement in the year represents these timing differences across contracts at each year end. The following table sets out a reconciliation of the movement in contract assets in the current and prior years.

 
                                                                       FY 20    FY 19 
                                                                     GBP'000  GBP'000 
 
Contract assets relating to contracts with customers 1 April 2019      1,540    2,743 
Increase in contract assets for the period                             1,288    1,540 
Contract assets released                                             (1,540)  (2,743) 
 
 
Balance as at 31 March 2020                                            1,288    1,540 
 

The expected credit loss calculated on accrued income was not material at the current or prior year ends.

13. Trade and other payables

 
 
                                                 FY 20              FY 19 
                                               GBP'000            GBP'000 
 
Trade payables                                   2,329              1,437 
Accruals                                        12,863             12,744 
Deferred income                                  1,336                662 
Taxation and social security                     4,213              2,000 
Other creditors                                  1,489              1,584 
Earn-out provision                               3,699                  - 
Total amounts owed within one year              25,929             18,427 
 
 

Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 30 days (FY 19: 30 days). The Directors consider that the carrying amount of trade and other payables is a reasonable approximation of their fair value.

Accruals included the provision for employee profit share bonus accrued through the year and paid after the year end.

Earn-out and deferred consideration comprise GBP1.7m deferred consideration linked to the acquisition of Obsidian Solutions Limited and GBP1.9m that relate to deferred consideration and earn-out payments arising from the acquisition of Axxsys Limited at the balance sheet date. Further, earn-out and deferred consideration includes GBP0.1m relating to earn-out payments linked to the acquisition of TrackTwo GmbH due in 2020.

Within taxation and social security is an existing GBP1.4m provision relating to historic pre-AIM admission potential tax treatments. The amount of this tax provision 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. Whilst a range of outcomes is reasonably possible, the extent of the range is further additional liabilities of up to GBP0.4m or a reduction of such liabilities to GBP0.2m.

Deferred income recognises contract liabilities arising from the Group's revenue generating activities relating to payments received in advance of performance delivered under a contract. These contract liabilities typically arise on short-term timing differences between performance obligations in some milestone or fixed fee contracts and their respective contracted payment schedules. The contract liability movement in the year represents these timing differences across contracts at each year end. The following table sets out the revenue recognised in the current year that relates to carry forward contract liabilities and the liabilities recognised in the current year which have been deferred to the next reporting period. All current deferred income is expected to be recognised through revenue within one year.

 
                                                           FY 20    FY 19 
                                                         GBP'000  GBP'000 
 
To be undertaken and recognised within 1 year              1,513      332 
To be undertaken and recognised between 1 and 3 years      1,752      556 
To be undertaken and recognised after 3 years                 67      225 
 
                                                           3,332    1,113 
 

Unperformed balances represents the revenue that the Group will earn from customers when the Group satisfies the remaining performance obligations in certain contracts. These mainly relate to Alpha Data Solutions' multi-year contracts which range between 1 to 5 years in which software access revenue is recognised over the access period. The following table sets out the aggregate amount of the contracted transaction price allocated to performance obligations that are unsatisfied or partly satisfied at the year end date. Unperformed balances relating to contracts with an expected original life of less than one year are not disclosed. Similarly, the Group has adopted the practical expedient not to disclose amounts under longer term contracts in which the revenue is to be invoiced on agreed day rates. Revenue from unperformed performance obligations is expected to be recognised in the following timeframes.

14. Other non-current liabilities

 
                                                   FY 20    FY 19 
                                                 GBP'000  GBP'000 
 
Earn-out and deferred consideration (note 11)      6,864      486 
Other non-current liabilities                        240        - 
 
 
                                                   7,104      486 
 

Within non-current liabilities are GBP2.6m of costs associated with the potential earn-out payments linked to the acquisition of Obsidian Solutions Limited, which are contingent on performance and fall due over 12 months from the balance sheet date. In addition, GBP4.3m of costs are included within non-current liabilities relating to deferred consideration and non employment-linked earn-out payments from the Axxsys Limited acquisition falling due over 12 months from the balance sheet date. Refer to note 11 for further detail.

Other non-current liabilities include social security costs due on vesting of share options. Refer note 16.

15. Called up share capital

 
 
                                                       FY 20             FY 19 
                                                      Number            Number 
Allotted, called up and fully paid 
Ordinary 0.075p shares (1 vote per share)        103,607,638       101,974,874 
 
 
 
                                                       FY 20             FY 19 
                                                         GBP               GBP 
Allotted, called up and fully paid 
Ordinary 0.075p shares (1 vote per share)             77,706            76,481 
 
 
 

Movements in share capital during the year ended 31 March 2020:

 
                                                         GBP 
 
Balance at 1 April 2019                               76,481 
101,974,874 ordinary shares of 0.075p each 
Issued shares                                     (i)   1,225 
 
 
Balance at 31 March 2020 
 103,607,638 ordinary shares of 0.075p each           77,706 
 

During the year, 1,632,764 ordinary shares were issued by the Company to the Employee Benefit Trust ("EBT") for potential future satisfaction of share incentive plans. In addition the Company bought-back 172,719 shares from prior employees at nominal value and also transferred these to the EBT.

Alpha Employee Benefit Trust

The Group held 2,669,429 (FY 19: 476,206) shares in the EBT to satisfy share options granted under its joint share ownership plan ("JSOP"). Unallocated ordinary shares held within the EBT have no dividend or voting rights.

Treasury shares

The Group held nil (FY 19: nil) shares in treasury from prior employees for nominal value.

16. 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 ("MIP")

The Group has a 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 in the current and prior years to the Directors and senior management of the Company are subject to the fulfilment of two or more of the following performance conditions: (a) a specific business unit EBITDA, or other personal targets and goals; (b) the Group achieving a total shareholder return for the 3 years from date 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.

MIP awards have either nil exercise price payable (or no more than a nominal purchase 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 ("EIP")

In addition to the MIP, in the year ended 31 March 2018, the Board put in place a medium-term EIP. Under the EIP, a broad base of the Group's employees have been granted share options or share awards over a small number of shares. The EIP will be structured as is most appropriate under the local tax, legal and regulatory rules in the key jurisdictions and therefore varies between those jurisdictions.

At 31 March 2020 a total of 3,374,881 share option and award grants were made to employees and senior management during the period (FY 19: 407,258).

Details of the share option awards made are as follows:

 
                                               FY 20                   FY 20 
                                           Number of                Weighted 
                                       share options        average exercise 
                                                                       price 
 
Outstanding at the beginning of            3,198,286                       - 
 the year 
Granted during the year                    3,374,881                       - 
Exercised during the year                          -                       - 
Forfeited during the year                   (82,506)                       - 
Expired during the year                            -                       - 
 
Outstanding at the year end                6,490,661                       - 
Exercisable at the year end                        -                       - 
 
 

No share options were exercisable in the year.

The options outstanding at 31 March 2020 had a weighted average remaining contractual life of 2 years and a nil or nominal exercise price.

During the year ended 31 March 2020, options were granted on 19 June 2019 and 13 January 2020 to employees and certain senior management. The weighted average of the estimated fair values of the options outstanding is GBP0.77 per share (FY 19: GBP0.78).

The MIP share options 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.

The inputs into the model were as follows:

 
                                               FY 20 
 
Weighted average share price at grant date      2.19 
Exercise price                                     - 
Volatility                                    22.00% 
Weighted average vesting period                    3 
Risk free rate                                 0.51% 
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 has also applied incremental increases in the assumed likelihood of vesting for share options as the vesting date approaches and in line with individual entity performance to-date against the Group's approved budget, and the other performance conditions listed above.

The EIP share options outstanding were valued using a Black-Scholes model using the same inputs as above.

The Group recognised a total expense of GBP1.3m related to equity settled share-based payment transactions in the current year, including relevant social security taxes (FY 19: GBP0.9m). Given the estimation, were the future performance conditions for all outstanding share options assumed to be met, the charge in the year would increase by GBP0.4m

Other 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 assumed to grow in line with the performance of the business. Reasonable changes in this specific estimate does not have a material impact on the expense incurred in relation to social security costs or share based payments in the year.

17. Events after the reporting period

The Group consider that the outbreak of COVID-19 globally represents an adjusting event at the balance sheet date on the basis that the significance of the social and economic impact was apparent at that date. The Group has therefore considered all conditions up to the date of issuance of the financial statements as adjusting events. As disclosed in note 1, the impact of COVID-19 has been assessed in relation to: impairment of non-financial assets, going concern (note 1) and expected credit loss (note 12).

Renewal of the Group's revolving credit facility

The Group has one principal bank facility, which as at 31 March 2020, comprised a GBP5.0m committed revolving credit facility ("RCF") with Lloyds Bank plc, which was signed in October 2017, on AIM admission, expiring in October 2020.

Subsequent to the year end, in June 2020, the Group signed an extension and upscaled its RCF with Lloyds Bank plc to provide further funding flexibility. This amended RCF totals GBP20.0m and is for an initial three year term expiring in June 2023, with two 1-year extension options subject to lender approval. The facility is unsecured, instead guaranteed by the Company and certain subsidiaries. Drawings under this facility are charged interest at 2.1 per cent over LIBOR and the facility attracts an annual commitment fee. The loan has two covenants testing that the leverage ratio of net debt to adjusted EBITDA does not exceed two times and that interest cover exceeds four times. An arrangement fee was payable on signing.

- END -

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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