Alpha Financial Markets Consulting PLC
Annual Report 2019

Plain-text annual report

A l p h a F n a n c a l i i Annual Report & Accounts 2019 Alpha FMC 60 Gresham Street London EC2V 7BB +44 (0) 207 796 9300 enquiries@alphafmc.com M a r k e t s C o n s u l t i n g A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 9 alphafmc.com The power of our people Introduction Annual Report 2019 Welcome to Alpha’s 2019 Annual Report & Accounts Alpha is a leading global consultancy to the asset and wealth management industry. Perspective | Strategy | Technical Expertise | Data Solutions Headquarter in the UK, and quoted on the AIM of the London Stock Exchange, Alpha Financial Markets Consulting1 is a leading global provider of specialist consultancy services to the asset and wealth management industry. Alpha has worked with 80% of the world’s top 20 asset managers by AUM, along with a wide range of other buy-side firms. It has the largest dedicated team in the industry, with over 360 consultants globally, operating from 10 offices spanning the UK, Europe, the US and Asia. For more information, see the website: investors.alphafmc.com Contents Introduction Welcome 1 Highlights 2 Chairman’s Report 5 Global Chief Executive Officer’s Report Strategic Report 12 At a Glance 16 Market Overview 20 Business Model 24 Strategy 26 Key Performance Indicators 28 Risk Management Corporate Social Responsibility 38 Employee Framework 42 Case Studies 44 Our Communities Corporate Governance 50 Corporate Governance Code 52 Governance Framework 60 Board of Directors 62 Meet the Director 64 Audit Committee 66 Remuneration Committee 72 Nomination Committee 74 Directors’ Report 78 Independent Auditor’s Report Financial Statements 86 Chief Financial Officer’s Report 90 Consolidated statement of comprehensive income 91 Consolidated statement of financial position 92 Consolidated statement of cash flows 93 Consolidated statement of changes in equity 94 Notes to the consolidated financial statements 119 Company statement of financial position 120 Company statement of cash flows 121 Company statement of changes in equity 122 Notes to the Company financial statements Company Information IBC Directors and Advisers 1 Alpha Financial Markets Consulting plc: “Alpha”, the “Company”, the “Group” Company Information Directors and Advisers Nominated Adviser Grant Thornton 30 Finsbury Square London EC2A 1AG Broker Joh. Berenberg, Gossler & Co. 60 Threadneedle Street London EC2R 8HP Company Secretary company.secretary@alphafmc.com Corporate and Investors’ Website investors.alphafmc.com Client Website alphafmc.com Directors ENB Fraser JC Paton K Fry PR Judd NR Kent Company Number 09965297 Registered Office Alpha Financial Markets Consulting plc 60 Gresham Street London EC2V 7BB Auditor KPMG LLP St Nicholas House Park Row Nottingham NG1 6FQ Registrar Computershare The Pavilions Bridgwater Road Bristol BS99 6ZZ Design: Graphical www.graphicalagency.com Photography Inside back cover, pp 15 (left), 17, 22, 25, 26, 27, 29, 36−37, 41, 58 (top, bottom), 66, 67, 71, 73, 83, 89 by davebrownphoto.com pp 2, 5, 48−49, 60, 63, 86 by Alastair Lever pp 4, 6, 23, 35, 58 (middle), 84−85 by www.seanthephotographer.com pp 9, 10−11, 15 (right), 34, 69 by www.letsmakeit.fr pp 13, 19, 33, 57, 77, 128 by Andrew Elko 1 Financial Highlights2 Revenues Adjusted EBITDA3 Operating profit £76.0m £16.5m £12.6m (FY 18: £66.0m) +15.1% (FY 18: £14.0m) +18.0% (FY 18: £8.6m) +46.9% Adjusted cash conversion4 101% Adjusted earnings per share5 Total dividend per share6 12.05p 6.00p (FY 18: 83%) (FY 18: 9.80p) (FY 18: 5.17p) Operational Highlights and Recent Developments7 279 Clients (FY 18: 241) Includes 80% of world’s top 20 asset managers by AUM8 10 Offices (FY 18: 9) First office in a German-speaking market opened, Zurich 362 Consultants9 (FY 18: 305) Continued investment in the highest calibre consultants 12 Business Practices (FY 18: 10) Two new practices launched: FinTech & Innovation and ETF & Indexing – Acquisitions (FY 18: 1) Ongoing review of strategic acquisition opportunities 2 Comparable period references (“FY 18”) are to the 12-month period ended 31 March 2018. All rounding and percentage change calculations are from the basis of the financial statements, in £’000s 3 Adjusted EBITDA is operating profit before foreign exchange, interest, tax, depreciation, amortisation and other adjusting non-operational costs including acquisition costs, AIM admission costs, restructuring costs, earn-out costs and share-based payment charges. FY 18 adjusted EBITDA has been recalculated to exclude foreign exchange gains or losses. A reconciliation of operating profit to adjusted EBITDA is included in note 5 to the consolidated financial statements 4 Adjusted cash conversion is net cash from operating activities divided by adjusted operating profit. Adjusted operating profit is adjusted EBITDA less depreciation 5 Adjusted earnings per share (“EPS”) is adjusted profit after tax over the weighted average number of shares in issue in the period. FY 18 adjusted EPS has been recalculated to exclude foreign exchange 6 Total dividend is based upon a recommended final dividend per share of 4.09p 7 All operating highlights figures are absolute except for Acquisitions, which reflects the number of acquisitions undertaken in the reported period 8 9 “Consultants” and “headcount” refer to fee-generating consultants at the year-end: employed consultants plus utilised contractors Investment & Pensions Europe 2018, “The Top 400 Asset Managers” Annual Report 20192 Chairman’s Report 2019 has been a year of further growth for the Group. A robust business model, a leading consulting proposition and a strong corporate framework have enabled continuing success within a context of some political uncertainty. I am pleased to be introducing the Annual Report & Accounts of the Group for the 12 months to 31 March 2019. In its second year as a public company, Alpha has delivered growth in revenue, adjusted EBITDA and operating profit. This has been another successful year for Alpha and, at a time of political and, consequently, market uncertainty, it strengthens the view that Alpha has the right strategy and business model to support its clients’ evolving needs and deliver value for its shareholders. Overview of the Financial Year Following on from the success of the Group’s first year trading on AIM, Alpha has continued to perform well across its business areas and has delivered full-year results ahead of market expectations. With a positive flow of organic new business from clients choosing to use Alpha’s specialist consulting services, and continued demand for support from existing clients, revenues have risen by 15.1% on the previous financial year to £76.0m. This has translated into growth in adjusted earnings per share of 23.0% to 12.05p. I am also delighted to report the Group’s highest ever adjusted EBITDA of £16.5m (FY 18: £14.0m). Ken Fry Chairman 5 June 2019 “The Board is confident that Alpha is well placed to adapt to its clients’ evolving needs and to deliver ongoing growth.” Annual Report 20193 In line with the Group’s aim to provide the very best consulting proposition and to service a growing base of client relationships, further expansion has been delivered through the launch of a new European office, in Zurich, and the creation of two new consulting practices: FinTech & Innovation and ETF & Indexing. Alpha’s focus remains on delivering great outcomes for its clients, and it assesses new office and new practice opportunities led by a combination of market demand and direct client requests. The Group also continues to invest in its existing offices and consulting practices, thus strengthening and deepening that proposition globally. Dividend The Alpha Board10 is proud of the positive shareholder returns that the Group has delivered in the first year since its AIM admission and is pleased to propose a final dividend of 4.09p per share, which, if approved at the Annual General Meeting on 4 September 2019, will be payable on 11 September 2019. Together with the previously paid FY 1911 interim dividend of 1.91p per share, this gives a total dividend of 6.00p per share for the year, in line with the Group’s policy of paying approximately 50% of post-tax profits to shareholders and representing a 16.1% increase on the prior year end. Governance and the Board I am very happy to be supported in my role as Chairman by a Board of Directors with a wealth of relevant knowledge and range of non-executive experience. The Alpha Board meets regularly to oversee the Group’s corporate and operational activities, and to manage the progression of its strategic objectives. We are unanimous in our intention to maintain the core values of strong governance, integrity and business ethics, and were proud to be able to confirm our application of the Quoted Companies Alliance Corporate Governance Code since September 2018. We will continue to review how we best apply and embed these principles in our governance structures and processes. During the period, the Board has evolved further its corporate governance framework. I am pleased to report that we have strengthened the composition and expertise of the sub- committees, with Penny Judd joining the Remuneration Committee, which is chaired by Nick Kent, and myself joining the Audit Committee, which Penny Judd will continue to chair. John Paton formally stepped down from the Audit Committee in order that the sub-committee comprises solely Non-Executive Directors. John’s experience and valuable contributions have hugely supported the Audit Committee in its development since the AIM admission, and he will attend meetings as required by invitation. As part of the Board’s commitment to maintaining a strong corporate governance framework and ensuring that it continues to reflect the needs of the Group’s shareholders, employees, clients and wider stakeholders, an evaluation of the effectiveness of the Board, its sub-committees and individual Directors12 was performed in the period. Following that process, we believe that we continue to operate an optimal structure to secure future growth while, at the same time, protecting the Group’s unique culture. In the period, we have also completed a review of the Group’s risk framework. It concluded in the definition and delivery of some enhancements to our risk reporting procedures, which will allow the Group to have an even clearer focus around risk monitoring. Strategy The Alpha Board, supported by the Group’s executive team, remains committed to succeeding with its stated aims to differentiate, through a very focussed high-quality service offering; and to diversify, through organic growth and the acquisition of complementary businesses. At the same time, Alpha will continue to invest in and incentivise its high-performing employees, through a market-leading compensation package and strong inclusive culture. The Board believes that the Group has the correct strategy to deliver profitable growth and ongoing value for its shareholders. 10 “Alpha Board” is the Alpha Board of Directors, also referred to as the “Board of Directors”, the “Board” and the “Directors” 11 FY 19 is the financial year covering the 12 months to 31 March 2019. By comparison, FY 18 is the previous financial year covering the 12 months to 31 March 2018; and FY 20 is the subsequent financial year covering the 12 months to 31 March 2020 12 “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 Annual Report 20194 Chairman’s Report continued The business continues to have a very clear focus on providing the highest quality service to its clients, which remains at the forefront of strategic and operational planning. In line with the stated business strategy, the Group has continued to expand the scale, breadth and depth of its service offering. The Group adheres to the view that inorganic growth can be additive, bringing new products and recurring revenue to the business; and, therefore, continues to consider and review potential acquisition opportunities. After a period of integration following the Group’s first acquisition in 2017 of TrackTwo13, it is well prepared for the next steps in its acquisition strategy that will deliver both high-quality output and complement the existing service proposition. I am confident that Alpha’s quoted company status and performance record make it strongly appealing to any new businesses that may be approached as part of this strategy. Outlook The Board perceives that the structural drivers in the asset and wealth management industry, in which the Group operates, remain consistent with the previous period: pressure on fees, increase in assets under management and regulatory change. In spite of current geopolitical uncertainty, the Board is confident that Alpha, with its focussed market proposition, is well placed to adapt to its clients’ evolving needs and to deliver ongoing growth. I would like to pass on my personal thanks to the Global Chief Executive Officer, Euan Fraser, the Directors of the Board, the management team and all of Alpha’s employees for their hard work, support and fantastic contributions this year in delivering another strong set of results and continuing to make significant strategic progress. 13 TrackTwo GmbH Annual Report 20195 Global Chief Executive Officer’s Report We have been able to deliver another year of profitable growth, which is a testament to our people, our increasingly global footprint and ongoing investment in our service offering. It gives me great pleasure to be presenting our second set of full-year results as a public company, with FY 19 having been another successful year for Alpha. Following on from our AIM admission in October 2017, we have enjoyed a year of strong revenue, operating profit, adjusted EBITDA and profit after tax growth. This growth has been consistently delivered through the breadth of our service offering and the performance of our highly skilled team of consultants. Summary of Financial Performance The Group has demonstrated very good revenue growth, with a continued focus on operating margins, resulting in revenue increasing by 15.1% to £76.0m (FY 18: £66.0m), adjusted EBITDA by 18.0% to £16.5m (FY 18: £14.0m) and operating profit by 46.9% to £12.6m (FY 18: £8.6m). Our transition from a private limited company to a public company strengthened our statement of financial position and we have also had another year of excellent cash generation from operations. The Board is pleased to propose a final dividend of 4.09p per share, bringing the total dividend to 6.00p per share for the year. Euan Fraser Global Chief Executive Officer 5 June 2019 “We have a very high- performing team and the consulting practices in place from which to develop our service proposition and deliver our projects.” Annual Report 20196 Global Chief Executive Officer’s Report continued We delivered progress and saw operational developments across the Group during the year. In addition to the expansion of the service offering and growth in the number of clients that we support, we have strengthened our geographical footprint both through an increase in consultants as well as in the creation of a new European office in Zurich. Reflecting on the year ahead, we have robust, revenue-generating businesses in the UK, Europe & Asia, and the US, which we see as a growth market. We have a very high-performing team that can support our clients’ requirements; and the consulting practices in place from which to develop our service proposition and deliver our projects. 398 Total Headcount We continue to invest in the highest calibre people and our total headcount figure includes a business operations team spanning HR, finance and platforms to support future growth, in addition to 362 consultants. Alpha has again delivered strong organic growth across its core business, driven by working on some of the largest and most challenging projects in the asset and wealth management industry. We continue to see high levels of client retention, which produces repeat client sales year on year. The Group also added 38 new clients during the year, with a number of those coming from our relatively recent geographic expansion into Switzerland and Singapore. Operational Review The structural industry trends of increasing cost pressures and regulatory demand, alongside increasing assets under management, remain very strong within our marketplace. Against this backdrop, the Group continued to benefit from an increase in demand for Alpha’s subject matter expertise and consulting support across a growing client base. Consequently, FY 19 saw positive results from across all the Group’s core geographies: the UK, the US, and Europe & Asia. In the period, the Group expanded its service offering with the addition of two new practices: FinTech & Innovation and ETF & Indexing. In line with our organic approach to expanding the Alpha service offering, both of these practices were created in response to demand from our clients for assistance in understanding and taking advantage of the technologies, products and strategic opportunities that these areas present. Continuing the trend that we highlighted last year, Alpha’s well-established practices, such as Front Office, Distribution, M&A Integration and Operations & Outsourcing, again delivered good revenue growth. Several of the client engagements that we are supporting in these areas are substantial programmes of work either in scale or topic, and involve our consultants from multiple offices working together to provide seamless, best-of-breed delivery solutions. More recently created practices, such as Digital and Regulatory Compliance, performed very well and contributed to this year’s strong performance. We expect further demand and growth in those areas, with our client sponsors seeking to understand their end-client personas and transform digital experiences, while the industry continues to prepare for ongoing regulatory changes such as the Senior Managers & Certification Regime and Asset Management Market Study requirements in the UK, LIBOR transition and Brexit. Annual Report 20197 The UK remains the largest geography within the Alpha Group, and we are pleased with the growth achieved this year. Political uncertainty has impacted decision making within some of our clients and slowed our growth during H2 1914. We paused recruitment at more junior levels in response to that delay in decision making, but are pleased that a strengthening pipeline has allowed us to again increase recruitment at all levels. We continue to monitor the political context closely. The Group has again delivered substantial growth across Europe, with this strong performance including increasing revenue and profitability in France, Luxembourg, the Netherlands and Switzerland. We were very pleased to announce the opening of an office in Zurich, which is our first in a German-speaking market. We appointed a new country head in the Netherlands, Bastiaan Aalders, and we have been extremely pleased with the improved performance during the last six months under his leadership. In France, we were delighted to be recognised as a #1 consulting firm by Décideurs Magazines 201815 in both the categories of “asset management” and “wealth management”, which is a testament to the fantastic talent and delivery standards of our consultants based there. We see a number of growth opportunities in Europe, both in terms of geographic expansion and in the development of our existing practices. We continue to believe that the US market represents a significant opportunity for growth. Our view remains that we see no other consulting firm offering the same blend of expertise, market-leading consulting and project management skills in that marketplace. We only recruit candidates of the highest calibre and appropriate skillsets to represent our team globally and, in light of this, are pleased to report that we have increased our US director team in early FY 20 through internal promotion and a recent external hire. The Group’s strong underlying adjusted EBITDA performance reflects an expanding international footprint and growing global reputation as the consulting partner of choice to assist asset and wealth management clients with their most complex and demanding projects. During the year, we have continued to invest in central operational capability to support this ongoing global growth and demand; and to position ourselves well for the years ahead. Geographical Overview We are pleased to have enjoyed strong client-led demand across all of the markets in which we operate: Revenue UK US Europe & Asia Gross Profit UK US Europe & Asia 12 months to 31 March 2019 12 months to 31 March 2018 Change £44.9m £40.0m 12.3% £9.2m £21.9m £9.0m 1.5% £17.0m 28.9% £76.0m £66.0m 15.1% £20.1m £17.0m 18.2% £1.7m £7.3m £2.7m (38.2)% £5.6m 31.4% 15.1% £29.1m £25.3m Consultant Headcount UK US Europe & Asia Year-end totals 31 March 2019 31 March 2018 Change 174 55 133 362 165 44 96 305 5% 25% 39% 19% Each of our regional businesses has achieved revenue growth year on year. We remain very pleased with both the domestic client base in each location and our ability, as a global business, to provide an exceptional consulting experience to support clients with their most challenging projects, irrespective of where they are located. In line with our intention, we invested in our consulting teams post last year end in order to ensure that we brought Group utilisation back in line with our budget targets. The US business experienced lower gross profit and margin during the year, as the business consolidated progress, strengthened the team and added new domestic clients. 14 H2 19 refers to the second half of the financial year ending 31 March 2019 15 Joint first position with McKinsey and BCG in “asset management”; joint first position with Bain, McKinsey and BCG in “wealth management” Annual Report 2019 8 Global Chief Executive Officer’s Report continued Our People At Alpha, we are extremely proud of everyone in our global team and recognise that people are our greatest asset. We remain completely committed to hiring the very highest quality consultants at every level of the Group and increased our headcount of consultants by 19% to 362 globally (March 2018: 305). It is through the recruiting and retaining of such fabulous talent that we can continue our constant focus on quality and ensure that we deliver exceptional results to our clients every time, which in turn drives client loyalty and repeat business, and reinforces our market-leading reputation. Alpha is well recognised in the asset and wealth management industry for offering a compelling, differentiating compensation package, which serves to attract the very best consulting talent. Alpha’s proposition, combined with a relentless focus on creating a unique culture that separates us from our competitors, helps to incentivise the talent that we hire and preserve market-leading retention rates. That enables us to limit recruitment costs and continues to ensure that our clients benefit from the expertise that an experienced team brings. We are very proud that we offer all our people the opportunity to be shareholders in Alpha, which facilitates staff retention and the alignment of interests, but also appeals to a wide pool of fresh talent. I am delighted to report that our ability to attract high-calibre consultants who are interested in benefitting from the opportunities provided by our public company structure continues to strengthen. We operate the same employee equity schemes that were in place last year. During the reporting period 407,258 share options were awarded to new joiners and, as at 31 March 2019, approximately 18% of the Company’s issued share capital was held by employees. The Group will continue to promote broad employee participation through equity schemes. We have worked extremely hard to build a unique and differentiated culture at Alpha, and we invest in maintaining and enhancing that culture on a global basis. Our ongoing global secondment programme plays an important role in sustaining and developing that culture, as we continue to expand our global footprint. In addition, it plays a key role in ensuring that we have the same high-quality consulting team providing our clients with the same delivery experience in all Alpha locations. That unique culture has again been recognised in the UK where, for the third consecutive year, we have won a place in the Sunday Times 100 Best Small Companies to Work For list (2017, 2018, 2019). Culture and quality have, for many years, been the foundation of Alpha’s success and will unquestionably continue to shape and drive our business in the future. As an employer, we are committed to providing an open and collaborative working environment; and we want our people to feel a part of the Group’s ongoing success. Aligned to that objective, we have designed and launched an exciting new initiative during the year: “Innovation at Alpha”. The Alpha Innovation platform enables ideas from employees about how we grow the business to be submitted, assessed and developed. Ultimately, it allows our employees to support the realisation of the best ideas into new products, services and business lines while, at the same time, permitting the Group to harness the consultants’ front-line daily experiences and excellent insights to help shape the vision. The initiative is overseen by an Innovation Board, which has global representation; it has the full support of the management team and the Board of Directors. Growth Strategy Alpha’s objective is to be recognised as the leading asset management consultancy in all the geographies in which it operates, with an ongoing strategic focus to continue building scale in all markets. During the year, the Group has successfully built upon and enhanced that level of recognition. The Group continues to follow a growth strategy that is both organic and inorganic. Our historic growth has been mainly organic, and we are confident that we have the right opportunity and business model to continue expanding our service offering and geographic footprint. Alpha expects to deliver sustained growth in all its current geographic markets, including both established and more recently opened offices. Going forward, Alpha remains focussed on building its client base of asset managers, asset owners, wealth managers and those who support the asset management industry, such as third-party administrators. Annual Report 20199 Current Trading and Outlook The Group’s trading performance in FY 19 was strong. We have begun FY 20 well, with trading consistent across all the Group’s geographies. The Group continues to see a wide range of change projects within the Group’s client base and, looking at the year ahead, the Group has a solid business platform on which to grow and support additional clients and project types. Our strategic goal is to be the leader in all the markets in which we operate. We remain focussed on delivering that strategy by continuing to extend our geographic footprint and to deepen our high-quality service offering, while investing in our team of highly-skilled consultants. The Group is well positioned to leverage its recent accomplishments and to deliver another year of profitable growth. We see continued opportunities to invest in our service offering, and we will act upon these to both deepen and broaden our business practices. Over the course of the last year, we have increased our range of services from 10 practices to a 12-practice offering; and we expect that this will grow. The Group has built a reputation for an exceptional service proposition, which is heavily in demand across a wide range of asset management sponsors and geographies. We see the structural drivers within the asset management industry continuing to create significant change and opportunity within our clients, and we will adapt and expand our service offering to address that demand. Acquisitions As previously reported, acquisitions are an important aspect of the Group’s growth strategy, alongside organic growth, with a focus on acquiring businesses that offer complementary services to clients in Alpha’s existing and target markets. The Group’s objective is to extend our consulting proposition and broaden our reach into additional parts of the asset and wealth management industry and, potentially, into other financial services industries beyond asset and wealth management. The Group will continue to add to its service offering through selectively investing in new products and services that provide diversified and established revenues and, where possible, are underpinned by strong data or technology components. Annual Report 201912 At a Glance 16 Market Overview 20 Business Model 24 Strategy 26 Key Performance Indicators 28 Risk Management Business ReviewThe power of our people togrow the business12 At a Glance: creating a global growth model USA UK Europe Asia 55 Consultants 170+ Consultants 120 Consultants 10+ Consultants New York (2009) Boston (2015) London (2003) Edinburgh (2016) Singapore (2017) Luxembourg (2008) Paris (2010) Amsterdam (2015) Geneva (2017) Zurich (2019) Annual Report 2019Business Review13 Our story so far... First we: Became known to our clients for the high quality of our team. Focussed on outsourcing, operational change and M&A integration, with emerging distribution and front office capability. Then we: Capitalised on our reputation for market-leading consulting advice. Continued to develop consulting solutions across the asset and wealth management chain. We have: Established our global capability and reputation for delivering some of the most challenging and complex projects in the industry. Now we will: Continue to build scale both globally and across a range of domestic markets by growing and differentiating the service offering. Pursue our objective to be recognised as the leading global asset and wealth management consultancy. Alpha has appeared in The Sunday Times Top 100 Best Small Companies to Work For for three consecutive years, 2017−19. Annual Report 201914 At a Glance continued 2003 2009 2013 Alpha is founded in London as a provider of specialist consultancy services to the asset and wealth management industry. US presence is established, with opening of New York office. Investment in Alpha by Baird Capital. 2008 2011 2014 Europe presence is established, with opening of Luxembourg office. Creation of the Distribution and Front Office practices. New specialist practice Alpha Technology Services is launched. Alpha has been selected #1 consulting firm in France by Décideurs Magazine 2018 in both the categories of “asset management” and “wealth management”* *Joint first position with McKinsey and BCG in “asset management”; joint first position with Bain, McKinsey and BCG in “wealth management” Timeline depicts calendar years Annual Report 2019Business Review15 2015 2017 2019 Alpha’s Diversity & Inclusion programme is launched. Asia presence is established, with opening of Singapore office. Creation of the ETF & Indexing practice. Creation of Digital practice. Acquisition of TrackTwo; new specialist practice Alpha Data Solutions is launched. Successful AIM admission with a market capitalisation of £160m. Alpha has 240 consultants across nine offices. Alpha continues to grow, reporting most successful financial year to date, with Group revenues of £76.0m. 2018 Creation of the FinTech & Innovation practice. 2016 Investment in Alpha by Dunedin, with Baird Capital exiting in full. Alpha has c. 200 consultants across six offices. Creation of the Investment Guidelines and Regulatory Compliance practices. Annual Report 201916 Market Overview Alpha helps clients within the asset and wealth management industry to transform their business models and respond effectively to ever-changing demands and technical innovations. Market Context Alpha is a leading global consultancy to the asset and wealth management industry. The industry is made up of a large number of organisations offering diverse investment and support services to individuals, institutions and other corporate clients. Alpha assists a broad range of those industry players, including asset managers, asset owners, wealth managers, asset servicers, platforms and intermediaries. Within that group, Alpha works with companies of all sizes and maturity, from local start-ups to the largest global financial services firms; and plays an integral role in helping clients to transform their business models and respond to ever-changing demands and technical innovations. Structural Drivers The global asset and wealth management industry is undergoing significant and fundamental change. The industry continues to experience the strong structural drivers of increasing cost pressure and regulatory change, alongside a marketplace that is growing through the increase in assets under management (“AUM”). These drivers create demand for a broad range of consulting solutions, as clients within the industry consider how best to manage and adapt to an evolving and increasingly complex landscape. As market commentators note, compression on asset manager fees has been a key feature of the market for a number of years16, and is likely to remain prevalent while financial conditions alter, technology drives change and end-investors demand fee reductions. Meanwhile, asset and wealth managers are operating within an increasingly complicated regulatory and legislative landscape. MiFID II and the GDPR dominated 2018, and the industry prepares for ongoing regulatory change including the Senior Managers & Certification Regime and Asset Management Market Study requirements in the UK, LIBOR transition, FINRA’s published priorities for risk monitoring and examination in the US and Brexit. The Group’s consulting model, which combines global subject matter expertise in regulatory compliance, market-leading consulting experience and project management skills, is highly successful in helping clients navigate through this level of change. Asset and wealth managers are focussed in particular on these cost pressures and are investing heavily to maintain operating margins. This can translate into a range of projects, such as improving technology, data quality, operating processes and product rationalisation. In its asset management outlook for 2019, Moody’s Investor Service17 gave the industry a “stable” rating, with the view that asset managers can use technology and new cost structures to adapt to these market conditions; and seek an increase in scale and diversification through M&A activity. 16 BCG, “The Hidden Pressures on Asset Managers” (May 2018) 17 Moody’s, “Asset Management 2019 Outlook” (January 2019) Annual Report 2019Business Review17 Within this market context, Alpha assists its clients by assessing their needs and selectively identifying the most effective operating models, technical solutions and partners, across the entire value chain. In the period, the Group announced the launch of a dedicated FinTech & Innovation practice, which seeks to help asset managers benefit from innovative technologies in the marketplace that can enhance their business processes, reduce their operating costs and improve the end-client experiences. Alpha believes that while many firms already have a developed digital agenda, very few have mastered how to benefit from the explosion of emerging fintech firms and technology; and that this represents a significant future growth opportunity. Against the backdrop of regulatory initiatives and fee pressures, passive investing continues to grow. In the first half of 2018, 16 of the top 20 funds by net inflows were passive mutual funds and exchange-traded funds (ETFs), garnering $143 billion18. In response to this trend towards low-cost funds and index strategies, and the growing demand for consulting support from its clients, Alpha launched a dedicated ETF & Indexing practice. The practice strengthens the Group’s market offering in this area and aims to support businesses for success in the next chapter of the industry, in addition to creating a new consulting area to drive revenue growth. 33% Strong revenue growth delivered over multiple years. 279 clients assisted including asset managers, wealth managers and platform providers. 362 fee-generating consultants operating globally. 18 Deloitte Center for Financial Services, “2019 Investment Management Outlook: A mix of opportunity and challenge” (January 2019) Annual Report 201918 Market Overview continued Consolidation within the asset and wealth management industry is influenced by the anticipated benefits of an increase in global reach, product capability and distribution options. 2018 was reported as a record high for asset management M&A19, with the volume of assets moving hands through M&A activity reaching $4.7 trillion and representing a 29% increase on the previous year (2017). The Group believes that consolidations through acquisition or merger will remain a key feature of the marketplace, and is confident that there will be ongoing opportunities as it continues to benefit from a very strong market reputation in specialist M&A integration, operational and outsourcing consultancy services to the industry. Geographic Demand The structural drivers of change in the industry are globally applicable and, as a result, Alpha sees very similar client demand for its services across each of the markets in which it operates. An added complexity for global organisations is that each jurisdiction can have different approaches and obligations, which Alpha, with its increasingly global footprint and consulting expertise, is extremely well placed to assess and support. Alpha currently services clients from its offices in 10 major financial centres: London, Edinburgh, Luxembourg, Paris, Geneva, Zurich, Amsterdam, New York, Boston and Singapore. The Group believes that, in line with market activity and client demand, there are significant opportunities for further expansion globally, targeting Hong Kong and Frankfurt over the next 12 to 18 months. However, launching offices is always conditional upon the Group identifying the right people, with the appropriate blend of asset and wealth management expertise and corporate values, to represent and develop Alpha’s capability and talent in new jurisdictions. Competitive Environment As a provider of consultancy services, Alpha operates in a competitive global market. Its competitors are the advisory practices of the major accounting firms, global consulting companies and single-geography consulting businesses. With their remediation programmes in the banking and insurance industries coming to an end, the major accounting firms and large global consulting companies, including the “Big 6”20, are tending to focus more on asset management. This has resulted in some short-term discounting on rates in the market and, consequently, an increased aspect of competition. However, the Group has been able to compete successfully against these firms and increase market share year on year by providing specialist expertise and insight to the asset and wealth management industry, and by consistently delivering an exceptionally high quality of service that attracts repeat business and engenders long-term client relationships. All of this is made possible through the Group’s ability to attract experienced, high-calibre consultants, and to retain a progressive working culture that is based on hard work, meritocracy, high standards, integrity and delivery excellence. Addressable Market As a leading global consultant to the asset and wealth management industry, the scale of the Group’s addressable market is broad and diverse, ranging from firms managing a few hundred million dollars of assets to global managers managing several trillion dollars of assets. Assets under management are increasing at a global level as a result of changing demographics and the recognised need to plan for aging populations in many countries. According to a recent report by PwC21, AUM stood at approximately $98.1 trillion at the end of 2017, and is estimated to increase to $145.1 trillion in 2025. 19 Sandler O’Neill & Partners, “2018 Asset Manager Transaction Review & 2019 Forecast” (January 2019) 20 “Big 6” comprises KPMG, PwC, Deloitte, EY, Accenture and IBM 21 PwC, “Asset & Wealth Management Revolution: Pressure on Profitability” (October 2018) Annual Report 2019Business Review19 In practice, each asset or wealth manager has a range of responses to the structural drivers in the market, and a corresponding set of executable initiatives, projects and objectives that extend across the value chain. Together, this represents strong aggregate demand for the Group’s skills, products and propositions. Alpha is proactive in understanding and responding to the opportunities that these developments create, with each of its offices monitoring the local market environment and conditions carefully. The global asset and wealth management industry is subject to the impacts of fluctuating markets and economic conditions. However, the diversified nature of Alpha’s market offering, comprising a broad global footprint, highly expert service proposition and deep understanding of the structural drivers of change, ensures a level of protection against these factors. The Group can also leverage its extensive experience and capability in supporting its clients through complex change initiatives that they may need to undertake in response to the evolving market. The Group recognises that there is a wider addressable market within the financial services sector that it does not service currently, and where there is potential opportunity for Alpha to develop a market-leading proposition. Alpha will continue to invest in its people, practices and capabilities to ensure that it is able to respond to ongoing and evolving market demand while, at the same time, providing the best level of service and expertise to its clients. Offices in 10 major financial centres: London, Edinburgh, Boston, New York, Amsterdam, Luxembourg, Paris, Geneva, Zurich and Singapore. 80% Of the 20 largest global asset managers by AUM, and 68% of the top 50. Annual Report 201920 Business Model Alpha provides consulting solutions that deliver value, using local expertise and global insights. The business model delivers success for clients and secures sustainable growth for shareholders. Clients Services and Expertise Alpha organises its knowledge, subject matter expertise, methodologies, intellectual property and data around 12 business practices. All Alpha’s practices are led by senior directors to provide effective management and oversight of the high-quality delivery outcomes. The practices enable the Group to be specialist and respond to the evolving requirements of its client stakeholders, while maintaining a core set of exceptional service standards. This practice model is supported by seamless collaboration and knowledge share across the Group’s consulting teams globally, which ensures that Alpha’s clients receive the highest level of service, delivery approach and output irrespective of where they are on the globe or what role in the industry they perform. The business model is built around Alpha’s clients; identifying and launching new practices where there is client-led demand, and achieving continued growth in its existing practice areas. In the period, the Group launched two important new practices, FinTech & Innovation and ETF & Indexing. Both practices were launched in response to a demand for Alpha to assist its clients with practical advice on how to make the most of opportunities arising in the rapidly changing asset and wealth management industry. The Group will continue to grow and extend the business model in line with client and market activity. Alpha’s successful business model is built upon keeping clients’ needs at the core of its proposition, which includes the Group’s geographic network, the services it offers and the types of project that it delivers. As the Group services not just asset and wealth manager firms, but the intermediaries, platforms and administrators who form an integral part of the industry, it is essential that the business model is flexible and remains highly relevant. Central to Alpha’s culture is continuous investment in its people, its offices and its knowledge to help all clients address their challenges and best capitalise on the opportunities. An important aspect of the Group’s revenue growth is the building of long-term relationships, and the cross-selling and upselling new added-value services to an existing client base. The majority of Alpha’s annual revenues is from repeat clients, with whom the Group is working on an increasingly global basis. However, the business model also targets revenue growth through the winning of new clients; and, in the period, the Group began working with 38 new clients. The Group’s ability to target and win new business relies upon a responsive business model that identifies and adapts to the structural drivers of change in the market, which it achieves through the development of relevant services and solutions. Alpha’s ambition is to be clearly recognised as the leading global consultancy to the asset and wealth management industry and, accordingly, has expanded the business model to deliver a multi-layered proposition that reaches every part of the value chain. The performance of the business model is then measured through the Group’s key performance indicators on p. 26. Annual Report 2019Business Review21 s e a ti v A lt e r n Asset M a n a g er s ETF & Indexing Benchmarking FinTech & Innovation Operations & Outsourcing s r e d i v o r P e c i v r e S Digital Alpha Technology Solutions M&A Integrations Alpha Data Solutions Front Office Investment Guidelines Regulatory Compliance Distribution W e a l t h M a n a g e r s A s s et O wners e diaries f o r m s & I n t e r m P l a t Practices Client segments Organic Growth Alpha’s strategy focusses on organic growth through expansion into new geographies, broadening its service offering and building the client base. Alpha’s Strategy in Action Inorganic Growth Acquisitions can support organic growth in adding new services and expertise that the Group can take to clients. 1 2 Expand the existing business practices. Roll out the practice model globally. 3 Make selective acquisitions. Annual Report 2019 22 Business Model continued Of the existing practices, Regulatory Compliance, Investment Guidelines, Alpha Data Solutions and Digital are still relatively new, and there represents an opportunity to further develop and establish those propositions in the Group’s core markets. In addition, there is ongoing expansion work to ensure wide geographic access to the Group’s range of practices. The geographic expansion of Alpha’s business practices is a key component of the growth strategy. As the demand drivers apply in each location, the Group can aim to roll out and grow this proven practice model in all regions. For example, during FY 19, the Group’s technology services capability has been expanded into its European and US offices to manage the increased regional demand. Talented People Alpha is a business built upon the integrity, expertise and huge commitment of its people. In order to provide the best outcomes to its clients and deliver growth, Alpha employs and invests in the highest calibre consultants in the industry. This high-performing global team brings market-leading experience, unparalleled insights and personal credentials to the corporate proposition. As a Group, Alpha continuously strives to improve and provide better, smarter solutions. Alpha’s team of consultants know the asset and wealth management industry, in which the Group operates, extremely well. During the period, the Group was excited to launch a new internal initiative that formalises the relationship between the market awareness and unique insights of its consultants, with the evolution of the business model. The Alpha Innovation platform enables innovative ideas from employees to be formally assessed; and, ultimately, allows them to support the realisation of the best ideas into new products, services and business lines. Generating Value Alpha prides itself on an ability to solve problems for its clients and provide a market-leading proposition. The Group also seeks to leverage its position as a leading consultancy to help shape the future of the industry through expert knowledge, advice and insights. The Board recognises the need to maintain effective working relationships across a wide range of stakeholders. The business model identifies the different client segments with which the Group operates, which includes asset managers, asset owners, wealth managers and those who support the industry, such as third-party administrators. The Group continuously monitors client satisfaction and fulfilment of Alpha’s delivery obligations, which is ensured through designated engagement owner responsibilities on each project and a centralised service delivery function that oversees quality of service and delivery risk identification. Other stakeholder groups include vendors, industry bodies, regulatory authorities and competitors with whom Alpha works or associates in the marketplace. Engaging with these stakeholders strengthens the Group’s business relationships and facilitates its decision making at an executive level. The Board is regularly updated on wider stakeholder engagement; the Executive Directors manage those business relationships on a day-to-day basis and in turn communicate feedback and insights to the Board as a whole. Alpha remains confident that, in serving the asset and wealth management industry and its client stakeholders with an exceptional proposition and level of service, it is ensuring the ongoing success of the business. This, in turn, supports the ability of the Group to provide long-term returns for its shareholders. The Group will continue to develop its offering by broadening the range of services that it offers, the types of clients that it can support, and the geographies from which it operates. Annual Report 2019Business Review23 Key Strengths The key strengths that enable Alpha to fulfil this business model are: • Providing a highly focussed industry proposition for the asset and wealth management industry; Investing in the very best consultants in the industry; • • A unique culture that supports and rewards high performance, collaboration and integrity; • An integrated service offering and seamless global reach; • Continual development of capability and range of services to both anticipate and meet client requirements; • A focus on putting clients first and establishing long-term relationships; • An emphasis on providing the highest quality of service to clients and, where possible, exceeding their expectations; and • An ability to leverage best practice, differentiating intellectual property and data, state-of-the-art technology options and invaluable market knowledge developed over more than 15 years. Annual Report 201924 Strategy The Group’s strategic objective is to be recognised as the leading global asset and wealth management consultancy, and as the leading consultancy in all the domestic markets in which it operates. Benefiting from a market-leading reputation and strong tailwinds within the industry, Alpha has continued to build scale both globally and across a number of domestic markets in which it operates. The market exhibits ongoing growth and the structural drivers of change represent clear opportunities for the Group to differentiate further its service offering and to grow the business. The Directors are confident that the Group is well positioned to achieve its strategic objective of being recognised as the leading consultancy to the asset and wealth management industry globally. The majority of Alpha’s historic growth has been organic, and the strategy remains focussed on achieving further client-led organic expansion, through a combination of extending the geographies in which the Group operates and expanding the range of services. The strategy also comprises the pursuit of acquired growth, whereby the Group will selectively consider acquisitions that can both enhance value and broaden its expertise and service offering. The Group intends to deliver the strategy in the following ways: 1. Expand the existing business practices Alpha serves clients in multiple countries through its successfully deployed practice model. The Directors have identified that there is substantial scope to grow the Group’s share within these markets by extending the services that are delivered to existing clients, or by serving new clients, through the addition of business practices. The Group will continue to evaluate market demand for new products and services; and respond to it by deepening the proposition and expanding the number of practices. To achieve this, the Group will invest in its talented people, the service offering and the practice structure, through a combination of internal promotions and external senior hires. 2. Roll out the business practices globally The Directors support the view that the strategy includes moving into additional parts of the asset and wealth management value chain. To date, the Group has achieved a globally recognised service offering, and the same highly successful business model can be replicated in new areas of the industry. The Group currently views further potential addressable opportunities in strategy consulting and life & pensions investments. Establishing a proposition in these areas will, however, require the recruitment of high-performing people to develop and grow them; and potential candidates continue to be reviewed. The Group currently provides services to its clients from 10 global offices in the UK, US, Europe and Asia. The strategy is to extend and strengthen its service proposition globally by deploying the existing practices consistently across all regions. This will be achieved by introducing and developing those specialist practices in each of the Group’s jurisdictions. The Directors believe that the building out of the Group’s proven practice model across the US, Europe and, ultimately, Asia will help to meet evolving client demand and drive future growth globally. Annual Report 2019Business Review25 3. Make selective acquisitions The Group recognises that it can strengthen the service offering and, therefore, add value through strategic acquisitions. The Group operates a selective and disciplined approach to acquisitions, considering opportunities of consulting businesses, technology and data products, and intellectual property that support and complement organic growth. Alpha believes it is well placed to identify technology and data led acquisitions that would benefit its clients’ operations and, in turn, generate growth for the Group. A broader range of knowledge and capabilities can also increase cross-sell potential as well as creating additional addressable areas of the market. The Directors are confident that Alpha’s industry proposition and strong culture offer a compelling platform for the owners of any such target complementary firms. “The market exhibits ongoing growth and the structural drivers of change represent clear opportunities for the Group to differentiate further its service offering and to grow the business.” Annual Report 201926 Key Performance Indicators The Directors have defined the following key performance indicators (“KPIs”). These KPIs link to the Group’s growth strategy and are used to monitor the Group’s income statement and performance. KPI Revenue The revenue KPI measures how well the Group has expanded its business through organic and inorganic growth. Gross Profit This KPI further helps to measure the profitability of the Group and the success of the business model. Adjusted EBITDA Earnings before interest, tax, depreciation, amortisation and exceptional items is a measure of the underlying profitability of the Group. Headcount The year end headcount KPI measures the growth in the Group’s fee-generating consultants globally. Trend FY19: £76.0m FY18: £66.0m FY17: £43.6m FY16: £36.4m FY15: £30.4m FY19: £29.1m FY18: £25.3m FY17: £15.0m FY16: £12.5m FY15: £9.4m FY19: £16.5m FY18: £14.0m FY17: £8.6m FY16: £7.0m FY15: £5.2m FY19: 362 FY18: 305 FY17: 240 FY16: 196 FY15: 152 Annual Report 2019Business Review27 “ Alpha is a fantastic company to work for, with a unique company culture.” Alpha employee Annual Report 201928 Risk Management Active risk management is embedded across the Group through the risk management framework, which comprises systems of governance, control processes and a strong corporate culture of responsibility. The policies and decisions of the Board with regards to risk are implemented through the Group’s executive team, represented by the Global Management Board. The Global Management Board encompasses all the areas in which business-level risk may arise or apply, including finance, IT & infrastructure, HR, business development and service delivery. The members of the Global Management Board have a direct reporting line into the Board of Directors, principally via the Global Chief Executive Officer. However, any member of the Global Management Board can be invited to present their risk management activities, including risk escalation and risk monitoring processes. The Group believes that corporate responsibility underpins a successful risk management strategy. Acting responsibly and taking accountability in day-to-day business activities is expected and required of employees in all parts of the organisation. It is a core value that is written into the Employee Handbook, which all staff must read and attest to. This includes the need to follow and ascribe to relevant policies, training and procedures that are decided at a senior level. Overview The Group’s operating model, and the asset and wealth management industry in which it operates, expose it to a number of uncertain internal and external events, which constitute risks. The Group manages risks in order to limit potential adverse effects on the implementation of its strategy, its financial performance and the interests of shareholders. It does this by ensuring that there is a robust framework in place to identify, assess and govern risk. Governance and Responsibility The Group governs risk through executive oversight and responsibilities that extend across all business areas. As illustrated in the diagram on p. 29, the Group follows a “top down” and “bottom up” approach to monitoring and managing its risk exposures. In this approach, top-down strategic risk management is directed from the Board; and applied through the actions of the executive team and wider senior management within operations. Bottom-up operational risk management is implemented through the engagement, risk awareness and corporate responsibility of all Alpha employees. The Board of Directors has overall accountability for ensuring that risks that could impact the long-term success of the Group are identified and effectively managed. The Board delegates oversight of the Group’s risk management processes and control environment to the Audit Committee. Annual Report 2019Business Review29 Risk Management Governance STRATEGIC RISK MANAGEMENT: • Assesses and reports on principal risks & uncertainties • Agrees the risk appetite • Agrees the key risk indicators • Determines strategic action points EXECUTIVE RESPONSIBILITY: • Monitors external environment • Oversees business-level risk management activities • Monitors key risk indicators • Oversees strategic action points • Ownership of the risk register OPERATIONAL RISK MANAGEMENT: • Monitor operating environment • Identify, assess and mitigate operational risks • Implement strategic action points • Execute policies, training & controls BOARD OF DIRECTORS AUDIT COMMITTEE GLOBAL MANAGEMENT BOARD CORPORATE ASSURANCE: • Oversight of risk procedure • Internal control • Assesses effectiveness of risk management framework & reporting BUSINESS UNITS Objectives of Risk Management The main objectives of the Group’s risk management framework are to ensure that there is: • A strong corporate culture of risk awareness and responsibility embedded at all levels of the organisation; • Reduction of ongoing risk as far as possible, without unduly affecting the Group’s competitiveness and flexibility; • Proactive identification and reporting of risk information, with clear management and mitigation responsibilities; and • Provision of a suitable basis upon which the Audit Committee and, ultimately, the Board can assess the effectiveness of the Group’s risk management and internal controls. Improvements to the Risk Management Approach Alpha has a global risk management framework in place in order to assess and manage risks that may have an impact on the business. The Board believes that these practices should be regularly reviewed in order to allow for continuous improvement and development. As part of this continuous improvement objective, at the end of Alpha’s first 12-month period of trading on AIM, the Group undertook a review of its risk management framework. The goal of the exercise was to ensure the ongoing appropriateness of the framework following a period of growth and corporate governance change, including the Group’s adoption of the QCA Code. The following incremental enhancements were delivered: • Additional investment in staff training around data handling and including data protection, cyber and information security; • Enhanced risk reporting including expanding into risk indicator metrics and consolidating reports from across all business areas; • Annual review of the Group’s risk policy to reflect the Group’s evolving business model and the strategy elements that were implemented in the course of the year; and • Updating the Group’s risk appetite statement to articulate the appetite for each of the three categories in the Group’s risk register (operational risk, industry risk, financial risk), in order to identify any new areas of focus. Annual Report 201930 Risk Management continued Risk Assessment Financial Risk Management The Group reviews and monitors risk exposures closely, considering the potential impact and any management actions required to mitigate the effect of emerging issues and events. The Group’s risk register is the principal tool for managing risks, which are categorised as operational, financial or industry risk; and the Group’s risk appetite statements. Adherence to the Group’s risk appetite statements is monitored using key risk indicators, which have been developed and incorporated into the Board’s risk reports during the period. The risk register is owned by the Global Management Board; and it is maintained using current inputs from the core business functions. Risks are assessed using a scoring system, with each risk scored according to the likelihood of occurrence and the associated impact to the Group and the execution of its strategy. This approach to risk assessment facilitates escalation to the Board of Directors of the key material risks. It also ensures the business’s ability to review risks, identify trends and respond with an effective set of actions. Group risks are reviewed, discussed and challenged first by the executive team, through the meetings of the Global Management Board. The key material risks, as agreed at the Global Management Board, are then reported to the Board of Directors. Reporting decisions are documented in order that the assessment and escalation approach can be reviewed by the Audit Committee as part of its assurance responsibilities. In exceptional circumstances, that is where the risk is of a sensitive business nature, a risk may be raised on an individual basis to the Global Chief Executive Officer, who can present that directly to the Board. The Board has agreed that the most material current risks to the Group will be presented in the Annual Report as the principal risks. Applying the described approach, the Board is able to confirm that a robust assessment of the principal risks has been carried out. The Group has established internal control and risk management structures in relation to the process for preparing the consolidated financial statements. The key features of this framework are: • The Group’s executive team understands the importance of internal control and adhering to the principles of risk mitigation on a global, operational basis; • The Audit Committee has primary responsibility for reviewing the quality of internal controls and checks, with a view to ensuring that the financial performance of the Group can be properly measured and reported on; • The Chief Financial Officer regularly monitors and considers developments in accounting regulations and best practice in financial reporting and; where, appropriate, reflects developments in the consolidated financial statements; • The Group’s results are subject to various levels of review within the Group’s finance and management teams; • Both the Audit Committee and the Board review the draft consolidated financial statements; • The Audit Committee receives reports from senior management and the external auditor on significant judgements, changes in accounting policies, changes in account estimates and other pertinent matters relating to the consolidated financial statements; and • The financial statements are subject to external audit. Brexit The Directors and the executive team monitor the geopolitical developments surrounding the UK’s decision to leave the European Union (“Brexit”) closely. The Group has assessed that it does not expect Brexit to have a material direct impact on its ongoing growth and development of the business, given Alpha’s lack of reliance upon significant outsourcing or service arrangements between the UK and EU countries, and its network of offices across Europe. The most likely impact of Brexit on the business is a potential short-term delay to client decision making, which is not expected to have any adverse effects over the medium term. Therefore, Brexit is not presented as a principal risk. The Group is conscious that this position may change, and unexpected new challenges could arise that affect this risk assessment, including the broader impact that Brexit has on the UK economy as a whole. Annual Report 2019Business Review31 Principal Risks The table below outlines the principal risks to the Group, as agreed by the Board. They are not the only risks that may affect the Group, but they are the risks that the Board, currently, believes would have the most significant impact on the Group’s strategy to achieve long-term profitable growth. There may be additional risks that materialise over time that the Group has not yet identified or deemed to have a potentially material adverse impact on the business and the business strategy. Operational Risk The Group’s approach to minimising operational risk is to centralise relevant processes and oversight frameworks through the leadership team, which includes the Chief Operating Officer, Head of IT & Infrastructure and Head of HR. Operational risks are mitigated accordingly through operational projects that are designed to strengthen the control environment and protect Alpha’s competitive standing with regards to people and quality of service. RISK People & Resourcing Failure to attract, incentivise and retain the best people with the right capabilities across all levels and geographies. Quality of Service Failure to maintain quality of service on client delivery engagements. Data Security Risk of a security breach leading to loss of integrity or availability of core data. Mitigating Factors • Attractive culture that places people at the heart of the business • Regularly benchmarked, market-leading remuneration package that includes a differentiating profit share • Employee equity participation offering, including management • incentive plan for directors In-house recruitment process, targeting top university graduates and experienced professionals • Comprehensive training and development programme, building consulting skills and industry knowledge • Broad and reactive support structure, including HR, individual mentors and external advice scheme • Clearly defined project terms agreed up front, ensuring that each delivery framework is appropriate, and the objectives are achievable • • Clear individual responsibility on every engagement via the Alpha engagement lead, who is a senior member of the Alpha team Internal service delivery function managed by the Chief Operating Officer, providing strong oversight and enabling early risk identification • Continuous monitoring of client satisfaction and fulfilment of agreed delivery criteria through the Alpha engagement lead, in addition to the Alpha client account owner • Defined IT Security Policy including breach management procedure • Annual cyber security review by external party and renewal of Cyber Essentials certification • Core cloud services hosted in vendor data centres utilising industry- standard security • System access controls and encryption • Physical security controls at office locations • Mandatory training around data handling and security Annual Report 201932 Principal Risks continued Industry Risk The Group’s approach to minimising industry risk is to undertake a regular assessment of the market and its influencers, including regulatory, political and structural change; and to maintain a strong dialogue with market participants, such as clients, competitors and industry bodies. This review is delivered through the Group’s defined corporate governance responsibilities, wherein the Executive Directors manage those relationships on a day-to-day basis and communicate the key findings and perspectives to the Global Management Board and, in turn, to the Board of Directors. RISK Strategy Macroeconomic Conditions Political / Regulatory Environment Mitigating Factors Risk that the Group responds inadequately to changing market conditions or fails to meet its strategic objectives, such as continuing organic growth. • Business strategy is reviewed regularly by the Global Management Board and the Board of Directors • Strategy informs annual business planning and budgets, and is tracked accordingly • Regional CEOs are responsible for monitoring markets and client demand locally, proposing and implementing relevant, competitive service propositions Risk that macroeconomic factors outside of the Group’s control change, affecting its clients, their demand for consultancy services and, hence, the Group’s own performance and financial position. Risk that Alpha’s business model and strategy is materially impacted by legal, political or regulatory changes that restrict service offering or access to markets. • Monitoring of the market to identify, and plan for, potential change in market conditions and volatility • Flexible business model that is responsive to change and regularly reviewed • Record of identifying opportunities to provide consulting services and delivering successful projects in challenging change conditions • Global nature of the business and range of practices that should reduce the risk of impact from volatility in specific markets • Ongoing diversification and expansion of the service offering that should reduce impact of restrictions • Strategic geographic extension of the business, overseen by the Board and executed by the Global Management Board • Regulatory, political and legal change horizon scanning, led by the Global Chief Executive Officer, to foresee and plan appropriate responses • Dialogue with regulators, legal advisers and industry bodies In respect of Brexit, continual monitoring of the political • negotiations and appraisal of potential implications for the Group Annual Report 2019Business Review33 RISK Competitors Risk that an existing competitor or new entrant may over time be able to achieve similar success and win work from the Group’s existing clients. Client Concentration Failure to expand the client base or a reduction in the number of key clients due to consolidation in the industry. Large-Scale Projects Reduction in major and large-scale projects, currently a consistent and considerable source of fee generation. Mitigating Factors • Monitoring of competitor positioning including client win/ loss ratios • Proven ability to understand the structural drivers of the market, to innovate and develop the service offering accordingly • Key competitive differentiators: – Highly focussed proposition for the asset and wealth management industry – Strong, increasingly global reputation amongst clients, with the very high quality of the team as a key competitive advantage – Differentiating intellectual property and benchmarking data • Expanding global team of consultants able to attract new market entrants and new entities within existing client structures • Growth objectives include diversifying the Group’s client base • Regular monitoring of client concentration by revenues • Business strategy includes extending the Group’s offering with new services and products to cater for different client segments • Deep specialised industry expertise equips the Group to win and complete projects of all sizes and complexity • Growth strategy that targets extension of service offering and capability to service an array of requirements in addition to the large-scale M&A, operations and front office projects • Presence in annual project portfolio of smaller projects that cumulatively could provide equivalent value to large programmes Annual Report 201934 Principal Risks continued Financial Risk The Group’s approach to minimising financial risk is to manage utilisation, day rates, expenses and cash collection actively and closely. The Group’s target is for projects to be chargeable on a time and materials basis, and to ensure that all time is recorded and billed each month. A considerable amount of attention is paid to day rates and their alignment to budget, which are reviewed and monitored by regional CEOs and the Executive Directors. RISK Utilisation Rates Mitigating Factors Risk that utilisation rates, which drive Group profitability, may be adversely impacted by poorly timed headcount growth or an unexpected decline in client projects. • Target utilisation rates are agreed annually per region, and are monitored by the regional CEO • Oversight of delivery against agreed resource utilisation by regional CEO or head of country • Ongoing review of global utilisation by Chief Financial Officer, in conjunction with visibility of pipeline and recruitment plans; and discussed regularly with regional CEOs and heads of country Cash Collection Failure to collect cash on client invoices on a timely basis. • Group-wide aim is to sell consulting services on a time and materials basis, minimising work in progress or accrued unbilled time • The Group’s standard policy on the payment of client invoices is to settle within 30 days • The Chief Financial Officer assesses the Group’s cash and debtors position on a regular basis, which is discussed with regional CEOs / heads of country and covered as an agenda item at the Global Management Board meetings By order of the Board. Euan Fraser Global Chief Executive Officer 5 June 2019 Annual Report 2019Business Review35 “ Alpha is head and shoulders above the competition when it comes to knowledge of the asset management space.” Director, global asset manager Annual Report 201938 Employee Framework 42 Case Studies 44 Our Communities Corporate Social ResponsibilityThe power of our people toachieve our ambitions38 Alpha brings together the best and most talented people, creates a fantastic place to work and provides an environment for exceptional success. Employee Framework Creating the Best Consulting Company Recruitment Alpha’s success is owed to its people, whose personal investment in, and exceptional commitment to the corporate proposition have driven strong organic growth over the company’s 16-year history. It is thanks to our highly talented global teams that we continue to deliver great outcomes for our clients, which in turn drives client loyalty and repeat business. Alpha’s track record evidences an impressive ability to identify and recruit the very best performers in the industry. We have created a reputation in the recruitment market as being one of the most exciting and rewarding companies to work for, and candidates actively approach us. We have a rigorous in-house recruitment process that focusses on finding raw consulting talent and capability, a high-level of commitment and the aspiration to succeed; and we are known as being a difficult company with which to achieve the offer of a consulting role. Once hired, we provide our employees with all the subject matter expertise, support, training and experience needed to thrive. This year, we were delighted to welcome our largest graduate intake since launching the programme in 2012. Recognising the success of our UK-based graduate scheme, the Group has extended the programme to the US for the first time, where there were eight graduate starters in September 2018. Attracting, retaining and developing the very best people in the industry is integral to both our culture and ongoing success. We are committed to making Alpha a highly rewarding place to work, and to maintaining a unique and inclusive culture that places people at the heart of the business. We are very proud of our three consecutive years in the top 50 of the Sunday Times 100 Best Small Companies to Work For since we began participating, and we are delighted with the positive reviews of Alpha as an employer on Glassdoor. Underpinning Alpha’s unique culture are the Group’s core values, which guide how our employees work and collaborate. Alpha brings together the best and most talented consultants in the industry. However, it is important that they know and believe in the same corporate values, which serves to align our incentives to achieving success both at an individual and Group level. The core values are documented in the Employee Handbook, which all employees must read and attest to, and are discussed regularly in various global forums. Annual Report 2019Corporate Social Responsibility39 Our core values define who we are both as a company and as professionals: We pride ourselves on working collaboratively with our clients We take accountability for delivery – we own and take responsibility for outcomes We are proactive – we use our extensive personal and corporate experience to get tasks done We focus on providing deep expertise within our specialist industry segments Our company provides a meritocratic, sociable and supportive environment – we want to be recognised as the very best place to work in our industry, with personal career progression based on transparent and purely meritocratic considerations Everything we do is defined by integrity – we hold ourselves to the highest standards of transparency, honesty and personal integrity We are socially and ethically responsible “ Our people are the backbone of the business. We are constantly looking for ways to make the work environment even better and to give everyone the very best corporate experience possible.” Euan Fraser, Global Chief Executive Officer Annual Report 201940 Employee Framework continued Support and the Working Environment Our consultants work on some of the industry’s most challenging and complex change projects. Ensuring that we support them, and prioritise their objectives and needs is of paramount importance. To facilitate this, we have an established mentoring and employee oversight framework across all global locations and all levels. At the same time, we continue to invest in our training and development programmes to build consulting skills and industry content. Training opportunities include industry-leading professional qualifications such as IMC, CFA and CAIA. We hire the highest performing people, but it is through our comprehensive support and training initiatives that our teams grow in knowledge, expertise and confidence. Employee Feedback Alpha’s vision is to maintain an interactive working environment that is based upon open communication and the exchange of proactive insights from the employee base. Employee feedback has always been a significant component of that picture. In the period, reflecting upon the Group’s growing size and global reach, we defined and launched a refreshed global employee feedback framework. The intention of that framework is to receive a comprehensive view of our employees’ sentiments and to encourage effective engagement within the firm to own, drive and embed positive change. The new framework, which has now been deployed globally, provides opportunities throughout the year for employees to submit their feedback about all aspects of working at Alpha, including wellbeing, day-to-day project life, the strategy, sensitive concerns and personal development. Employees can provide their feedback anonymously and through peer groups, and we are confident that these mechanisms complement the executive team’s “open door” policy, further highlighting for our attention just what matters to our people. With the objective of making Alpha the best corporate experience that anyone has during their career, and on the basis that Alpha’s people have the most important perspectives on how to achieve that, we have established an important employee led initiative: Project Neutron Star. Project Neutron Star is an umbrella project for the socialisation and aggregation of insights between our people, which can improve the employee experience. During its course, a number of important employee ideas have been identified and delivered, from internal communication improvements to additional training topics to “life hacks” providing techniques to help with managing life, time and workflow. Launched to great success and popularity in the UK, it will be rolled out globally in due course. Employee engagement is a highly important aspect of Alpha’s culture. Encouraging employees to share perspectives, insights and ideas about the company through their feedback is complemented by an open and progressive leadership approach, whereby the management team regularly provides information on matters regarding Alpha’s strategy, governance, global events and corporate initiatives. The executive team’s principal mechanisms for engaging with employees on this basis are the communications of the CEO and the monthly company meetings, which take place in all locations. Ensuring that employees are updated and able to comment on the Group’s achievements, considerations and key decisions ensures that they feel invested in its growth. Running the Business The Alpha team has an exceptional array of skills. We give our people the opportunity to develop their interests and talent by helping to manage core business functions. We regard this as an important opportunity for our employees to contribute to and be part of the evolution of Alpha. Areas where these skills are valued and used include corporate social responsibility, infrastructure innovation, internal IT projects, marketing and business development. Across all locations, our people also play a very significant part in our recruitment process. The team is empowered to actively participate in recruiting the highest calibre consultants and promoting Alpha through their own experiences. More broadly, we encourage everyone to act with an entrepreneurial spirit, providing ideas and opinions on the way we run the company, the work that we do and where we move next. During the year, this principle has been fortified through the introduction of the Alpha Innovation platform, which enables any employee to submit ideas about how we grow the business in terms of new products, services and business lines; and therein help to shape our global vision. Annual Report 2019Corporate Social Responsibility41 Sharing in our Success Allowing our people to share in Alpha’s growth story is a highly valued component of the business. We have developed a number of initiatives that recognise and reward the exceptional personal contributions that our teams make; and that deepen the relationship between our employees and Alpha’s ongoing success. Alpha is able to attract and retain high-calibre consultants at all levels and in all locations by offering a market-leading compensation package. Alpha’s social agenda is a very important aspect of how we recognise and reward our achievements. We have several key events during the year, supported by an internal social team, which ensure that we take the time to reflect on and enjoy our personal and company-wide successes together. There are many ways in which we celebrate, from regular mentor-mentee events, to peer group outings, to fully-funded Christmas parties and summer conference events, which are held internationally and have previously included Monaco, Ibiza, Italy and, for the US team, Miami. As an employer, Alpha can differentiate itself from competitors in a number of ways: • Remuneration packages are benchmarked against the “Big 6”, and Alpha typically offers a base salary that is in line with the best in the market; • Participation in the Company’s profit-sharing scheme (with remuneration linked to Company performance), which can deliver a significant increase to an already competitive base salary; • All employees are offered equity participation through the employee incentive plan (“EIP”) and a management incentive plan (“MIP”) for directors; • A comprehensive training and development programme that greatly enhances Alpha’s desirability to clients and drives increased loyalty to the firm; and • Opportunities to work on interesting and varied projects, including high-profile client engagements and transformational deals in the industry. Annual Report 201942 Corporate Social Responsibility Case Studies Kirby Eckels Analyst (US) Nora Soos Business Operations (Global) I joined Alpha in August of 2018 as part of the inaugural graduate intake in the United States. One of the things that drew me to Alpha, particularly as a new graduate, was the opportunity to work alongside some of the brightest people in the industry. Throughout the recruitment process, Alpha’s exceptionally talented and welcoming team stood out as they spoke about Alpha’s meritocratic structure and emphasis on personal development. I joined Alpha in June 2014 in the pursuit of being part of a success story and joining an organisation where HR has key business significance. Being the first dedicated HR resource at Alpha provided me the chance to help shape our people landscape to the success that it is today. Over the years, my role has grown to become global and I now have the great fortune to work with our brilliant teams across 10 locations, alongside a hugely talented HR team. As an employee, I have experienced Alpha’s incredible culture first hand. Upon joining, the other American graduate analysts and I trained with the wider graduate intake in London. We enjoyed meeting colleagues from around the world and found that Alpha’s supportive, dynamic, meritocratic DNA extends beyond any one region. After training, I had the opportunity to contribute to several strategic projects, from M&A due diligence to investment technology implementations. I do not know of many firms that encourage analysts to drive forward key client presentations or to lead meetings, but I have enjoyed these opportunities − and many more − at Alpha. As I reflect on the start of my career at Alpha, I could not be happier. I love working with such an intelligent, driven and thoughtful team, at a company that truly invests in its people. I am excited to see what the next year will bring for Alpha and the growing US graduate programme. Bastiaan Aalders Director (Europe) Quality! If I were asked to summarise Alpha in only one word, that would be it. My first exposure to Alpha was back in 2010, in the UK. I was running a due diligence project and Alpha was representing my new client. I was so impressed with the work delivered during the project that I decided to hire Alpha myself, only a few months later. Again, I was very impressed with what was delivered. Years later, in 2018, I decided to become an employee of Alpha myself. It was always the plan to join the firm at some point, but when I got offered the responsibility for the Dutch office, based in Amsterdam, I could not refuse it. The Netherlands is an attractive market for Alpha and, with a small team of very talented consultants, we are building our proposition and our business profile in both wealth and asset management. Yes, the competition is fierce, but Alpha continues to execute to the same level of quality and commitment as I saw all those years ago, and I see great growth for the business in the Netherlands. Alpha is an inspiring place to work, where individuals come together and aim to achieve the highest standard in every aspect. It has certainly allowed me endless opportunities to contribute to our growth at the same time as gaining unparalleled personal experiences. Working for an organisation where core values such as integrity are deeply embedded within the HR strategy is very hard to find. Thus, it is an absolute pleasure to collaborate with a leadership and wider team that champion a culture where people are truly valued, and decisions are driven by the simple notion of “what is the right thing to do?”. Rachel Phelps Consultant Developer (UK) I joined Alpha Technology Services (ATS) in July last year, following three years’ working in corporate banking. The move was prompted by my interest in technology and coding, as well as by my contacts at Alpha, from whom I had already learnt what an exciting (and fun!) place Alpha is to work. My technical skills have been quickly developed, both through client commitments (including an eight-month assignment to a new distribution engagement) and ongoing internal development work within Alpha (including a leading role on our internal Salesforce upgrade). I was delighted to see the value of my work recognised, as I was promoted to consultant developer within eight months of joining. Outside of my core role, there have been incredible opportunities to support Alpha internally, from being the key point of contact for building new Slack integrations; to my involvement in recruitment, as both coordinator for the ATS graduate scheme, and head of the recruitment stream for Gender Equality. One of the best qualities of Alpha is the people. Alpha consistently hires high-calibre, like-minded individuals, who collaborate well both inside and outside the office, creating a great environment that encourages everyone to perform to their best, both individually and as a team. Annual Report 201943 Divakar Padmanathan Senior Manager (UK) Prior to joining Alpha’s graduate scheme, my only experience of the world of work was gained through internships that I had completed at multi-national organisations. Therefore, with Alpha’s team at the time still in double digits, it was with a degree of trepidation that I first applied, uncertain about what a career at this small, unfamiliar firm would entail. However, by the end of my first round of interviews, the unique culture embodied by everybody that I met left me with little doubt that Alpha was where I wanted to build my career. Five years later, this culture persists, bringing together the entrepreneurship of a start-up, the responsibility of a multi-national, and the support of a family business. It is within this unique environment that I have had the confidence and freedom to pursue my own areas of interest, ranging from the launch of Alpha’s first Diversity & Inclusion programme, to the creation of new propositions and taking them to market. The opportunities that I have benefitted from during my time at Alpha have far surpassed what I could have hoped for, and I look forward to contributing to Alpha’s incredible success story over the years to come. Joe Lee Consultant (Asia) My first encounter with Alpha began in late 2017, when a friend shared with me his experiences of working at Alpha. I soon found myself attracted to the team’s shared beliefs in growing the Alpha success story in Asia, and I officially joined the company in April 2018. Alpha Asia is in the middle of fast-growing opportunities. My excitement stems from the fact that this region is a multicultural ecosystem with many nuances, and that diversity flows into every client’s situation and needs. To successfully service a broad set of clients within that context is a challenge that I relish. Alpha encourages all employees to be part of the running of the business and I am involved in several management areas (both big and small!) outside of my client work; from writing local IT and training policies, sourcing printing cards, to leading the team to a charity-focussed corporate run challenge! I have great respect for my colleagues who continuously make this journey engaging and fun, with the senior leadership team setting the standards and pace of the company and empowering us to help mature the business in Asia. Today, as we continue to grow from strength to strength and in geographical footprint, I look forward to building our credentials in Asia and, hopefully, extending the same success model to other Asian markets. Dounia Zellou Manager (Europe) I joined Alpha in August 2016 as an analyst in the Paris office. Prior to joining Alpha, I worked in investment banking and wealth management. In addition to the appeal of joining a leading consulting firm in asset and wealth management, I was attracted by the opportunity to be involved in the growth and the further development of the company. This presents a compelling corporate and individual experience. Since I joined Alpha, I have been involved in a variety of projects, including defining and implementing target operating models for asset managers and private banks across different topics. On top of my client assignments, I have enjoyed being involved in developing our proposition around wealth management. Those experiences have helped me to develop my knowledge and skills, as well as to accelerate my professional development within Alpha. Alpha is a fantastic company to work for, with a unique company culture; the human dimension, the variety of company initiatives and the quality of Alpha’s people combine to make it a great work environment. I have now been working for Alpha for almost three years and I am very happy to be part of a company that allows me to be involved in a range of interesting projects, helps me grow and gives me the opportunity to advance my consulting skills. Annual Report 201944 Our Communities We understand the importance of social responsibility and ethical conduct at every level of our governance. We promote a culture that values employment diversity, environmental awareness and high corporate standards. We are proud to support our staff in engaging in activities that help and have a positive influence on our environment and communities. Our social awareness and strong business integrity unite us as a firm and create a powerful sense of fulfilment. Alpha’s corporate social responsibility (“CSR”) strategy is predicated on maximising the benefits and minimising the downsides of our economic, social and environmental impacts. We have continued to engage with our staff about the major issues that they want to change or address. It was our CSR team that led the initiative to make Alpha a certified Living Wage Employer in January 2018. Alpha’s internal CSR team has worked with Heart of the City, a registered charity based in London, to define and implement its CSR policy. Our chosen priorities include: • Minimising our impact on the environment: recycling where possible, reducing our use of paper and saving electricity; • Promoting a good work/life balance: encouraging flexible working patterns, offering a cycle-to-work scheme, maternity and paternity leave allowance; • Working with ethical suppliers and local businesses; • Commitment to the delivery of modern human rights; • Ensuring that our employees can participate in voluntary charitable and community-based activities: partnering with social mobility foundations and providing a Charity of the Year programme; Identifying pro-bono consulting and project work that our teams can support on a voluntary basis; and • Providing a framework for charitable fundraising and • payroll giving. A key CSR engagement initiative is providing support to young people in our communities who need assistance in their academic paths or first professional roles. In 2018, our French office partnered with Proxité, which is a charity providing mentoring, educational support and career advice to young people from disadvantaged backgrounds. In the UK, we work with the Social Mobility Foundation (“SMF”), which is a charity that aims to make a practical improvement in social mobility for high-achieving young people from low-income backgrounds. Alpha supports the SMF through mentoring programmes, whereby consultants can voluntarily mentor sixth-form and undergraduate students in their pursuit of a degree, career or other professional objective. We were delighted that 28 of our employees took part in this work in the last year. Diversity and Inclusion Alpha is fully supportive of all aspects of diversity and inclusion. As a people business, we believe that we have strength in openness and inclusivity. Our dedicated Diversity & Inclusion programme was launched in 2015 to formalise and fortify these values. The key streams of the programme are: Gender Equality at Alpha, Culture & Social Mobility at Alpha, Pride at Alpha, Wellbeing at Alpha, and Disability Confidence, which was newly launched in the year. We were very proud to have achieved Disability Confident Committed status in the UK. Annual Report 2019Corporate Social Responsibility45 Our global teams work very proactively to design and execute on new ways in which to engage and educate staff on diversity and inclusion, both in the workplace and in our wider communities The Gender Equality stream has experienced exciting growth and maturity this year, with the introduction of new events and activities that increase awareness of gender inclusivity, including roundtable discussions on shared parental leave and the celebrating of male role models throughout November for International Men’s Day. In recognition of International Women’s Day, Alpha’s employees were inspired to take part in a series of challenges on the topic of gender balance. We rolled out global training on bystander intervention and ran a “collaborating in the workplace” survey in partnership with Dr Jill Armstrong from Murray Edwards College, Cambridge, an expert in gender equality at work. The committee also commenced a closer partnership with Alpha’s recruitment team to ensure that we are maximising opportunities within our talent pipeline to feed sustainable gender diversity. E q u a l i t y G e n d e r Pride at Alpha’s mission is to ensure that Alpha continues to be a fair and inclusive place to work for everyone. We do so by supporting all Alpha employees so that they feel empowered, regardless of their own sexual orientation or gender identity. Over the last year, we have seen tremendous success in the continued roll-out and expansion of the work we do as a committee, as well as the engagement, support and contribution from people of all levels in the business. Some of the things we have organised over the last year included a training session on challenges faced by members of the Trans community, a global #ComeOutforLGBT initiative that allowed people to open up and share their own (and very personal) coming out experiences, and a Pride- themed event that helped raise awareness about the history of Pride, the Stonewall riots and the range of reasons why people are so deeply passionate about Pride. As we look ahead to the coming year, we have more exciting ideas to help expand our reach and impact. We will not only continue to grow the range of educational events offered internally, but increasingly are looking at how we can help drive change within the asset and wealth management industry to promote the needs and interests of the LGBTQ+ community. The Culture & Social Mobility stream works to create equal opportunities and an inclusive environment in which people are able to excel based on potential and ability, irrespective of background. Within the last year, we have formally launched a partnership with the Sutton Trust, a pioneering educational charity dedicated to improving social mobility and access to the most competitive industries. Through this partnership, we have shared insight to the management consulting profession at the Sutton Trust’s residential summer school for students from lower socioeconomic groups. We also invited 25 of the students to Alpha’s London office to attend a “consulting masterclass”, where they were provided with the opportunity to quiz members of the team on what a career in consulting would entail, whilst also participating in skills-based training to prepare them for future interviews and assessment centres. Internally, we have focussed on raising awareness through events such as themed company socials, and lunch and learn sessions, with the most recent focussing on “faith in the workplace”. S o c a l i M o b i l i t y As an employer, we are committed to providing an open, collaborative and supportive environment for all our people at all times. We believe that the health and wellbeing of our people is a crucial factor in delivering consistently strong results to our clients, developing and retaining our highly talented team, and meeting the challenges of a fast-growing business. With this in mind, Wellbeing is a key area of focus for Alpha, with several new initiatives in progress during the year: • Roll-out of a quarterly wellbeing pulse survey globally to monitor and respond to employee stress, throughout the year; • A global network of wellbeing ambassadors: staff champions trained in mental health first aid; and • A comprehensive programme of resilience training, covering practical self-care and “mind management”. P r i d e C u l t u r e & W e l l i b e n g Annual Report 2019 46 Our Communities continued Governance The Global Management Board oversees the cultural framework and is responsible for reviewing operational processes for managing social, environmental and ethical risk. All members of the Global Management Board, including the Global Chief Executive Officer, are committed to this framework and ensuring that it is embedded within the business globally. Its principal methods for promoting social, environment and ethical responsibility are the Employee Handbook, communications to staff on the topics of culture and integrity, sponsorship of the Diversity & Inclusion programme and supporting the wide-ranging interests of the global CSR teams. The Global Management Board reports into the Board of Directors, so that the Board can assess the state of corporate culture and integrity, and ensure that any significant risks to the longer-term success of the business arising from such matters are adequately addressed. The Board is committed to maintaining appropriate standards for all the Group’s business activities and ensure that they are set out in written policies, including the Employee Handbook and the Modern Slavery Statement. The Board believes that the business values of collaboration, accountability, proactivity, integrity and responsible conduct are consistent with the Group’s vision and fully support its ongoing growth. Modern Slavery Alpha is committed to combatting and preventing modern slavery, human trafficking and exploitation. We have in place procedures and policies throughout our business, supply and procurement chains to support this; a statement of which can be found on our website at alphafmc.com. These processes are reviewed annually. By order of the Board. Euan Fraser Global Chief Executive Officer 5 June 2019 “ It has been a true pleasure to work with Alpha FMC as their global charity partner. SOS Children’s Villages USA has benefitted greatly from the dedication and enthusiasm of Alpha team members, who provided invaluable insights and expertise to our organisation. Everyone brought a true customer orientation to the process of transforming operational challenges to efficiencies. This important pro-bono support will allow us to better support vulnerable children worldwide.” Annual Report 2019Corporate Social Responsibility 47 Children playing football in Cox’s Bazaar, Bangladesh, where nearly one million Rohingya refugees live in camps and makeshift settlements. Since the start of the crisis, MSF medical teams have provided more than one million medical consultations. Copyright: Vincenzo Livieri Charity of the Year We are very proud of our long-standing voluntary charitable work, which we formalised in 2016 through our Charity of the Year programme. We focus our support on one charity, which is nominated and chosen by the whole company. Focussing on one charity in this manner is designed to maximise our collective impact. Our inaugural charity of the year was AfriKids, which helps vulnerable children and their families in isolated rural communities in northern Ghana. For 2017, we partnered with the Lucy Faithfull Foundation, a UK-based, globally-linked child protection charity that focusses on the prevention of child sex abuse. For the first time, we introduced pro-bono work to the charity partnership. Subsequently, more than 490 hours of Alpha time was donated to the Lucy Faithfull Foundation through the pro-bono initiative, with over 17 staff choosing to become involved. For 2018, we reinvigorated our staff voting process to ensure that all our global offices had an equal voice in determining Alpha’s charity of the year. On this basis, the partner selected for 2018 was SOS Children’s Villages (“SOS”). SOS is a global charity that supports orphaned and abandoned children in 125 countries by creating safe spaces for them and working holistically to support them into adulthood. Over the course of the year, we raised over £30,000 (inclusive of gift aid) for SOS, which was directed towards a vocational training centre (“VTC”) in Monaragala village. The VTC provides training in craftmanship, baking, basic wiring and plumbing, IT and office skills to up to 150 trainees, giving them the change to escape the cycle of poverty. Pro-bono work featured once more with a vendor review led by the Alpha US team and process optimisation led by the Alpha Luxembourg team. For 2019, we are excited to have partnered with Médecins Sans Frontières (“MSF”), an international non-governmental organisation best known for its projects in conflict zones and in countries affected by endemic diseases. Throughout 2019, we will be joining forces to raise a minimum of £20,000 for MSF. The first event of the year was a fun run in March, which was arranged in tandem with Alpha’s Gender Equality committee. We look forward to evolving our Charity of the Year programme as we continue to grow. Rozia and her two-month-old son Zubair being treated in the MSF hospital in Goyalmara, Cox’s Bazaar, Bangladesh. Many of the children admitted have contracted infections from unhygienic birthing practises and the unsanitary living conditions in the camps. Copyright: Pablo Tosco/Angular Annual Report 201950 Corporate Governance Code 52 Governance Framework 60 Board of Directors 62 Meet the Director 64 Audit Committee 66 Remuneration Committee 72 Nomination Committee 74 Directors’ Report 78 Independent Auditor’s Report Corporate GovernanceThe power of our people todemonstrate integrity50 Corporate Governance Code An effective corporate governance framework is key to reducing risk, adding value to the business and bringing long-term benefits to the Group’s shareholders. It is the Board’s responsibility to oversee and optimise that framework. As an AIM quoted company, Alpha is required to comply with a recognised corporate governance code, or to explain any areas of deviation. The Board is committed to applying the highest standards of corporate governance, integrity and business ethics; and has determined that the Quoted Companies Alliance Corporate Governance Code (the “Code”, the “QCA Code”) is best suited to the Group’s principles, needs and size. The following governance report describes how the Group applies the 10 QCA corporate governance principles, which are also detailed on the Group’s website investors.alphafmc.com. Section 1: Deliver Growth Principle 1: Establish a strategy and business model that promote long-term value for shareholders. Principle 2: Seek to understand and meet shareholder needs and expectations. The business model is premised upon delivering growth through the cross-sell and upsell of its high-quality service offering to existing clients; and selling its services to new clients. The strategy is to continue to grow in both existing and new jurisdictions by developing tha service proposition. Good, consistent engagement with shareholders is given a high priority by the Board. The principal methods of communication with shareholders are the Annual Report & Accounts, the interim and full-year results announcements, the Annual General Meeting (“AGM”) and the Group’s website investors.alphafmc.com. Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long- term success. The Board, supported by the executive team, upholds a commitment to operating a socially and ethically responsible company. Engagement with stakeholders and wider communities ensures alignment of interests and facilitates good decision making. Links to the following report section The Group’s business model and strategy are described in the Strategic Report on pp 20-25. The Group’s approach to shareholder communications is described in the Corporate Governance report on p. 59. The Chief Financial Officer also acts as Company Secretary and is the main point of contact for shareholders (company. secretary@alphafmc.com). The Group’s Corporate Social Responsibility disclosure is provided on pp 38-47. The Group’s engagement model with clients and wider stakeholders is described in the Strategic Report on pp 20-23. Principle 4: Embed effective risk management considering both opportunities and threats, throughout the organisation. The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. The goal of the Board is to set policies that seek to reduce ongoing risk as far as possible, without unduly affecting the Group’s competitiveness and flexibility. The Group’s risk management framework is described in the Strategic Report on pp 28-30, and in the Corporate Governance report on p. 58. Annual Report 2019Corporate Governance51 Section 2: Maintain a Dynamic Framework Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair. The Group believes that the Board’s composition brings a desirable range of skills, personal qualities and professional credentials. Suitable Board operations; access to advice and administrative services; effective induction of new Directors; and a regular performance assessment also ensure Board effectiveness. Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities. As an AIM-quoted provider of specialist consultancy services to the asset and wealth management industry, Alpha’s Board needs to represent a range of skills and competencies, including experience in public markets, financial services, governance and audit, the consulting sector and business operations. Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. The objectives of the Board are to approve the Group’s strategy, budgets and key corporate activities, and to oversee the Group’s progress towards its goals. The Group has a process for evaluating the performance of the Board, committees and individual directors in respect of those objectives. Links to the following report section The Board’s composition and operating framework is described in the Corporate Governance report on pp 52-59. Biographical details of the Directors, including relevant experiences and how skill sets are kept up to date, are provided on pp 60-61 of the Corporate Governance report. The Board’s evaluation framework is described in the Corporate Governance report on p. 54. Principle 8: Promote a corporate culture that is based on ethical values and behaviours. The Board is conscious of its role in fostering and safeguarding a culture of inclusion, responsibility and openness. These values are embedded across the Group’s leadership and throughout the organisation. The Group’s culture and values are discussed in the Corporate Social Responsibility report on pp 38-47. Principle 9: Maintain governance structures and processes that are fit for purpose and good decision making by the Board. The Group operates an effective, streamlined governance framework. In this framework, the Board supports the executive team to develop and execute the Group’s strategy; and key decisions are reached through open and constructive dialogue. A governance chart is provided on p. 56 and processes are described on pp 54-55 of the Corporate Governance report. Section 3: Build Trust Principle 10: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. The Group places a strong emphasis on the standards of good corporate governance and maintaining an effective engagement with its shareholders and key stakeholders. In addition to the Annual Report & Accounts, the website is updated regularly with information regarding the Group’s activities and performance. Links to the following report section The governance of the Company, which is led by the Board, is described in the Corporate Governance report on pp 52-59. The website investors. alphafmc.com provides the Group’s reports and presentations; notices of AGM; and results of voting on all resolutions in AGMs Annual Report 201952 Governance Framework Board Composition Diversity The Board comprises five Directors: the Non-Executive Chairman, two Non-Executive Directors and two Executive Directors. Two of the Non-Executive Directors, one of whom is the Chairman, are independent. During the financial year to 31 March 2019, there were no changes to the composition of the Board. As a provider of specialist consultancy services to the asset and wealth management industry, and an AIM-quoted company, Alpha requires a range of skills, capabilities and competencies to be represented on the Board, including experience in public markets, financial services, governance and audit, the consulting sector and business operations. The Board is confident that its members have the appropriate balance of backgrounds, knowledge and personal qualities in order to meet this requirement and to deliver on the Group’s core objectives. Biographical details for all Directors, including a summary of their relevant experiences, are provided on pp 60-61 of the Annual Report & Accounts. The Board considers an independent Non-Executive Director to be free from any relationship that might materially interfere with the exercise of independent judgement. After careful review, Nick Kent has been recognised as non-independent due to his long-standing relationship with the business from his previous position as Chief Executive Officer. However, the Board judges that there is a suitable balance between independence and knowledge of the Company; and that Nick is fully able to discharge his duties effectively and responsibly. All Directors are encouraged and expected to use their independent judgement and to challenge all matters, whether strategic or operational. The Board makes decisions regarding the appointment and removal of Directors; and there is a rigorous process for the identification and appointment of new Directors that is led by the Nomination Committee. The Company’s Articles of Association require that all Directors must stand for re-election at least once every three years, and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment. No Directors are due for election or re-election this year. The Board, supported by the Nomination Committee, values diversity in its broadest sense and, when considering new Director appointments, will, in addition to considering gender, age, ethnicity, region and experience, look to maintain within the Board the appropriate balance of skills, independence and knowledge of the Company, its services and the industry as a whole. Further details of the Group’s approach to diversity and inclusion can be found on can be found on pp 44-45 and p. 73. Gender Male Female Role Non-Executive Chair Non-Executive Directors Executive Directors 4 1 1 2 2 Annual Report 2019Corporate Governance53 Roles of the Directors Committees of the Board The Group operates an effective, streamlined governance framework. In this framework, the Board supports the executive team, represented by the Global Management Board, in developing and executing the Group’s strategy. Any decision between the Board and the executive team are reached through an open and constructive dialogue. The Executive Directors of the Board are Euan Fraser, the Global Chief Executive Officer, and John Paton, the Chief Financial Officer and Company Secretary. The Executive Directors have strong knowledge of the operations of the Group, the interests of its stakeholders, and its market and financial positions. Senior executives below Board level attend Board meetings upon request to present and discuss business strategy and updates. The Non-Executive Directors of the Board have been selected with the objectives of increasing the breadth of skills and experience of the Board, and bringing constructive challenge to the Executive Directors. The Non-Executive Directors are also responsible for the effective running of the Board’s committees and ensuring that the committees support and facilitate the strategic priorities of the Board. At the head of the Group, there is a clear delineation of responsibilities between the Chairman of the Board and the Global Chief Executive Officer. The Non-Executive Chairman leads the Board and is responsible for its governance, performance and effectiveness. It includes ensuring that the dynamics of the Board are functional and productive, and that no individual Director dominates discussion or decision making. In this role, the Chairman sets the tone for the Company and ensures that the links between the Board and the executive team, as well as between the Board and the shareholders, are strong and effective. Meanwhile, the Global Chief Executive Officer is responsible for the day-to-day management of the Group’s global operations, for proposing the strategic focuses to the Board and for implementing the strategic goals agreed by the Board. The Company has effective procedures in place to identify, monitor and manage any conflicts of interest. The Board continues to monitor the scope and volume of activities performed by the Company Secretary and is comfortable that it is performed as part of another primary role (Chief Financial Officer). The Board has also reviewed the responsibilities of each of these roles and is confident that they do not present a conflict of interest. In order to fulfil the Group’s objectives and facilitate effective decision making, the Board has established the following committees, each with delegated responsibilities and duties: • An Audit Committee to monitor the quality of the Group’s internal controls, to maintain the relationship with the external auditor and to ensure that the financial performance of the Group is properly measured and reported on; • A Remuneration Committee to review the performance of the Executive Directors, the Chairman and the senior executive team, and make recommendations to the Board on matters relating to their remuneration and terms of service; and • A Nomination Committee to review regularly the composition and succession planning of the Board, and to lead the process for Board appointments. A report on the role, composition and key activities of the individual committees is set out on pp 64-73. From time to time, separate committees may be set up by the Board to consider and address specific issues or objectives, when the need arises. Length of Tenure 0-1 years 1-3 years 3-5 years 5-10 years 10+ years 0 5 0 0 0 Annual Report 201954 Governance Framework continued The Group believes that the selection, onboarding and development of Directors underpins its ability to perform to its objectives and ensures an effective Board. The Nomination Committee oversees the identification and selection of Directors that are equipped with the correct range of experience, knowledge, integrity and ethics; and makes recommendations for maintaining an appropriate balance of skills on the Board. The Nomination Committee may also use the results of the evaluation process when reviewing the composition of the Board for selecting any new Board members, and in succession planning for the Directors of the Board as well as key executive team members. Board Operations The Board is required to meet at least six times a year and, during the financial year, nine Board meetings took place. The Directors are fully encouraged to attend all meetings of the Board, and the committees on which they sit, and have agreed to allocate sufficient time to the Group as is needed to enable them to carry out their responsibilities as Directors. All Board members attended all meetings to which they were invited. The time commitment required of all Non-Executive Directors is currently three days per month, while the Executive Directors are committed on a full-time basis. The Board is satisfied that each of the Directors can dedicate sufficient time to the Group’s business and can fulfil the obligations fully. The Board and committee schedules are planned in advance of the financial year ahead, in order to facilitate attendance and ensure that the appropriate discussion time is available. A record of the number of meetings of the Board during FY 19, and the attendance by each Board member is provided on the right: Board Effectiveness The objectives of the Board are to review, formulate and approve the Group’s strategy, budgets and key corporate activities, and to oversee the Group’s progress towards its goals. The Group has a process for evaluating the performance of the Board, of its committees and of the Directors individually in respect of these objectives. Since the appointment of Ken Fry as Chairman, he has assessed the Board as a whole to ensure that it is functioning in an efficient and productive manner. During FY 19, the Board carried out a full, formal evaluation of its performance. This evaluation was carried out internally. The evaluation criteria included Board composition and skills, strategy and performance, governance and organisation, Board dynamics, and communication with shareholders and key stakeholders. The Board also appraised its members individually, the scope of which included their skills, experience and capabilities, and any additional responsibilities, such as chairing or membership of the Board’s committees. The Board evaluation was based upon self-assessment by the Chairman and Directors. The annual appraisal is carried out by the Chairman with reference to the competencies set out by the Nomination Committee pursuant to each Board role. As part of this process, any training and personal development needs are identified. The Chairman is also subject to appraisal; that process is managed by a Chairman Appraisal Group comprising the Global Chief Executive Officer and the Company Secretary. An external evaluation using an independent adviser may be performed in subsequent years, if required. The conclusions from the FY 19 Board evaluation confirmed that the Board continues to function effectively as a unit and in committees, and that the Directors discharge their duties adequately. On the topic of Board composition, the Directors agreed that, as the business grows in scale and complexity, they will keep under review the addition of another Non-Executive Director. The process also confirmed that the Board is committed to continuously enhancing its effectiveness and identified some minor process formalisations to support this objective. Annual Report 2019Corporate Governance55 The Chairman, aided by the Company Secretary, is responsible for ensuring that the Directors receive accurate and timely information for the Board meeting. The Company Secretary provides minutes of each meeting and every Director is aware of the right to have any concerns documented. In addition, the Company Secretary ensures that any feedback or suggestions for improvement of the Board papers are documented and evaluated for amendment or enhancement with respect to future meetings of the Board. Throughout the year, the Directors have direct access to the advice and services of the Company Secretary and may, in order to fulfil their duties, take independent advice at the Company’s expense. The Board members may seek the advice of the Group’s legal advisers, external auditor and the Nominated Adviser (NOMAD) on matters within the Board or the committee’s terms of reference, or to provide recommendations on specific corporate or governance events, such as the Group’s application of the QCA Code in the last financial year. Board member Eligible to attend Attendance Ken Fry (Chairman) Euan Fraser Penny Judd Nick Kent John Paton 9 9 9 9 9 9 9 9 9 9 The Board has an agenda of regular business, financial and operational matters for discussion, as well as a review of each of the Board committee’s areas of work. The key activities of the Board meetings during the year included the following: • Discussed and reviewed progress of strategic priorities; • Continued an open dialogue with the investor community; • Approved the financial reporting, including interim and full-year results; • Discussed the Group’s capital structure and financial strategy; • Reviewed the progress of key client relationships and engagements across the Group; • Considered financial and non-financial policies, including the risk policy; • Reviewed the Group’s risk assessments; and • Discussed the corporate governance processes. An effective corporate governance framework is key to reducing risk, adding value to the business and bringing long-term benefits to the Group’s shareholders. It is the Board’s responsibility to oversee and optimise that framework. Annual Report 201956 Governance Framework continued Board Structure Alpha Board Agrees Group strategy Oversees progress towards strategic goals Shareholder and stakeholder engagement Chairman of the Board Leadership of the Board Reviews performance of the Board Directors Ensures corporate governance E A N R Global Managment Board Audit Committee Nomination Committee Remuneration Committee Management of business operations Execution of strategy Ensures effective systems Reviews Board composition Agrees Group remuneration policies of internal control and balance of skills Oversees the Group’s financial reporting Appoints the external auditor Leads the process for Board appointments Ensures appropriate succession planning Ensures operation of transparent, simple and effective incentive schemes Considers alignment of reward with long-term shareholder value Global Chief Executive Officer Chief Financial Officer Chief Commercial Officer Chief Marketing Officer Chief Operating Officer & Chief Executive Officer, ADS Chief Executive Officer, UK Chief Executive Officer, Europe Chief Executive Officer, US Key: Executive E Annual Report 2019Corporate Governance57 “ Alpha’s history of delivery has been excellent.” Senior vice president, global service provider Annual Report 201958 Governance Framework continued Internal Controls and Risk Management The Board has overall accountability for the systems of internal control and risk management. The Audit Committee reviews and assures the effectiveness of the Group’s internal controls and risk management on the Board’s behalf. As part of that duty, the Board determines the Group’s risk management objectives and policies. In this respect, the objective of the Board is to set policies that seek to reduce ongoing risk as far as possible, without unduly affecting the Group’s competitiveness and flexibility. The Board believes that this approach serves the interests of creating sustainable shareholder value while also protecting the Group’s corporate culture. The operational functions of the Group are carried out within a practical and effective risk management framework. The Global Management Board is responsible for identifying and managing risk effectively, across the business. Any material operational decisions made by the Global Management Board in this respect are reviewed by the Board. The identified material operational, financial and industry risks facing the Group are also reported to the Board. A summary of the principal risks and uncertainties, as well as mitigating actions, are provided on pp 31-34 of the Annual Report & Accounts 2019. The Board formally reviews and documents the principal risks to the business at least annually. Processes to embed risk management throughout the Group, and opportunities to introduce further enhancements, continue to be reviewed and changes are implemented as appropriate. Annual Report 2019Corporate Governance59 Engagement Calendar FY 19 March−April 2018 Pre-close investor meetings September 2018 Annual General Meeting October 2018 Pre-close trading update November 2018 Interim results roadshow, UK March 2019 UK & European investor conference June 2018 September 2018 Preliminary results roadshow, UK & Europe Private client broker and shareholder meetings, UK October 2018 Pre-close investor meetings February 2019 US investor meetings Shareholder Communications The Board places an emphasis on maintaining an effective dialogue with its shareholders, which it considers to be integral to longer term growth and success. It is committed to communicating consistently and openly with shareholders. The principal methods of communication are the Annual Report & Accounts, the interim and full-year results announcements, the AGM and the Group’s investor website investors.alphafmc. com. During the year, the website is updated regularly with information regarding the Group’s governance, activities and performance. The Global Chief Executive Officer and Chief Financial Officer meet with the representatives of the Group’s institutional investors as well as analysts to ensure that the Group’s corporate objectives, strategies and operational developments are clear and understood. This includes investor roadshows, attending investor conferences and ad-hoc meetings that are part of the building of relationships with existing and future shareholders. Understanding what analysts and investors think about the Group is an equally important component of these interactions. The Board as a whole is kept informed of their feedback and views by the Global Chief Executive Officer and Chief Financial Officer. This includes feedback provided by the Group’s corporate broker, Joh. Berenberg, Gossler & Co., following investor meetings. The Chairman and Non-Executive Directors are also available to meet with shareholders if required to discuss any items of importance and, as interest in the business continues, it is expected that the Chairman will begin to join a range investor-related meetings. The Company’s second AGM since its AIM admission will take place on Wednesday 4 September at Berenberg, 60 Threadneedle Street, London EC2R 8HP. The Chairman and all the Board’s Directors will be present to answer any questions put to them by the shareholders. All resolutions will be proposed and voted on at the AGM meeting on an individual basis by the shareholders or their proxies. Voting results will be announced through the Regulatory News Service and made available on the Company’s website. By order of the Board. Ken Fry Chairman 5 June 2019 Annual Report 201960 Board of Directors Ken Fry Euan Fraser John Paton Non-Executive Chairman Global Chief Executive Officer Chief Financial Officer and Company Secretary Committee Membership Committee Membership Committee Membership CHAIR N A R N – Committee Membership Key: Member of the Audit Committee Member of the Nomination Committee Member of the Remuneration Committee A N R Penny Judd Nick Kent Non-Executive Director Non-Executive Director Committee Membership Committee Membership CHAIR A N R R CHAIR A Annual Report 2019Corporate Governance 61 Ken Fry Euan Fraser John Paton Non-Executive Chairman Global Chief Executive Officer Ken joined the Alpha Board in 2016, following almost 10 years as the Global Chief Operating Officer at Aberdeen Asset Management. He was appointed the Board’s Non-Executive Chairman in February 2018. Ken has over 27 years’ experience in financial services, and has considerable experience integrating acquisitions within the investment management industry. Ken has a strong technology and operations background, and has undertaken many transformational projects during his career. He directed the integration of major acquisitions while at Aberdeen Asset Management, including assets acquired from Deutsche Asset Management, Credit Suisse Asset Management and Scottish Widows Investment Partners. Ken keeps the skills to support and deliver the Group’s strategy up to date by maintaining a wide network of contacts within the financial services industry globally. He regularly attends conferences and discussion forums to keep abreast of industry issues and meets with a wide range of clients, employees, advisors and institutional investors. He also advises on M&A strategy within the investment management and wealth industry. Euan has served as Global Chief Executive Officer of Alpha since 2013. During this period, the business has increased EBITDA eight-fold, and he has led the Group through two private equity transitions and a public listing on the London Stock Exchange’s AIM in 2017. Euan was previously Chief Executive Officer of Alpha UK, starting in April 2011, where he established both Alpha’s M&A Integration and Operations & Outsourcing practices. He joined Alpha in 2004 and has over 20 years’ financial services experience, having worked at Merrill Lynch and KPMG, where he qualified as a chartered accountant. Euan keeps the skills to support and deliver the Group’s strategy up to date through his role as Chief Executive Officer of a global consulting firm operating within the financial services sector. In this role, Euan has to understand and manage the interests of a range of stakeholders, including employees, clients, competitors and investors. Euan also provides advice on M&A strategy and maintains a number of strong relationships within the industry. Chief Financial Officer and Company Secretary John joined Alpha, and the Alpha Board, in February 2018. John is a chartered accountant with over 24 years’ corporate finance, banking and audit experience. He previously worked at HSBC where, during his 11 years, he worked in both HSBC’s Global Banking & Markets and Commercial Banking divisions, with experience across debt and equity capital raisings and M&A advisory. John started his career at KPMG, working across financial services audit and risk management. He is a member of the Institute of Chartered Accountants of Scotland, graduated LLB (Hons) from the University of Aberdeen and holds an Executive MBA from the University of École Nationale des Ponts & Chaussées, France. John keeps the necessary skills to support and deliver the Group’s strategy up to date principally through his role as Alpha’s Chief Financial Officer. This role brings deep knowledge of the Group’s management, financial and operational activities, as well as important corporate and statutory responsibilities. John must also maintain a detailed view of industry, financial and regulatory changes. Penny Judd Nick Kent Non-Executive Director Non-Executive Director Penny joined the Alpha Board as a Non-Executive Director in February 2018, having previously held the roles of Managing Director and EMEA Head of Compliance at both Nomura International plc and UBS AG. Penny has a strong public markets and financial services background, with over 30 years’ experience in compliance, regulation, corporate finance and audit. She is also a chartered accountant and is currently Non-Executive Chairman of Plus500 Ltd and Non-Executive Director and Chair of the Audit Committee for both Trufin plc and Team17 Group plc. Penny keeps the skills to support and deliver the Group’s strategy up to date through her experiences gained on other listed company boards, while also maintaining a wide network of contacts in financial services and regulation. She attends various conferences and events covering relevant industry and governance matters, and meets with a range of advisers and institutional investors in AIM and main market companies. Nick has been a Non-Executive Director of Alpha since 2013. Nick has over 30 years’ consulting experience, including all aspects of the asset management business, with particular emphasis around addressing complex operations and IT issues. Nick has also worked extensively internationally, including in the US, Switzerland and the Netherlands. Nick founded Alpha in 2003, after 14 years at Accenture, where he was a senior partner and ran the UK Asset Management practice. Nick keeps the skills to support and deliver the Group’s strategy up to date through an extensive network, which he has amassed after more than 30 years’ consulting to the asset and wealth management industry. He continues to meet with a wide array of clients, competitors and other service providers to the industry. As part of the AIM admission, Nick attended training regarding best practice for Non-Executive Directors of listed companies. Annual Report 201962 Meet the Director: Penny Judd How did you get involved with Alpha and what are your key areas of focus as a NED at Alpha? I was introduced to Alpha through a mutual contact at Alpha’s broker. Alpha was a good fit for my background with a number of key touchpoints. I am a qualified accountant who spent 10 years working for KPMG in auditing, corporate finance and consulting roles; a background similar to several of those working at Alpha. I have spent time in a number of investment banks and have had oversight responsibility for the compliance function, including the asset management parts of the business, although my main focus has been on the investment banking side. A large part of my career has also been in the regulation of listed companies both as a regulator at the UK Listing Authority and as a corporate financier at Cazenove. So, there was an alignment for me with Alpha in terms of the experiences and understanding that I could bring. The attraction of Alpha for me is to be involved with a dynamic, growing company that is at such an exciting time in its development. The move to becoming a public company is an enormous commitment on the part of the management but is also a transforming moment for the company, allowing growth and a sharing of investment, which I have always found very fulfilling to be a part of. Alpha has an impressive management team and a very strong culture, which makes it a great company to be associated with. My role at Alpha is Chair of the Audit Committee, so is focussed on oversight of the external audit process and issuance of the financial statements, as well as on the adequacy of internal controls and the identification and mitigation of risks. How has the role of NED changed in recent years? I have been an independent NED for three years now, having previously held executive roles in a number of different institutions. Before moving to a portfolio NED career, my first non-executive experience was as a governor and chair of audit for a local university college. I have worked with the boards of listed and unlisted companies throughout my career and I think the NED role has come into much greater prominence in more recent years, particularly in financial services and given the challenges the sector has faced. The expectations and responsibilities of NEDs has become more defined and there is a growing body of guidance and continuing education opportunities for those in NED roles. I see a number of people moving into NED roles earlier in their careers and the previous stereotype of a NED as someone at the end of their career moving towards retirement is changing. I do think, however, that a significant amount of executive experience is very helpful. What advice do you have for individuals aiming for leadership positions in financial services? The same advice as in any sector. I would say: take opportunities as they arise and don’t have too fixed a view of the route you want to take. Sometimes, unexpected opportunities can lead to very interesting career chances. Take responsibility for your career and let people know if you are interested in an opportunity − don’t think that it is someone else’s job to do it for you. Invest time in building and maintaining your personal networks. I think every role that I have taken has been due to a connection or an introduction. It is very easy when you are working extremely hard and building your career to neglect this aspect, but it is invaluable. Finally, when you are in the position to build your own teams, recruit and promote the best people you can find and give them responsibility and empower them. It will make your life so much easier! Annual Report 2019Corporate Governance63 Annual Report 201964 Audit Committee The Audit Committee provides oversight and governance to the Group’s financial statements, its systems of internal control and relationship with the external auditor. Committee Governance Key Responsibilities The Committee is chaired by Penny Judd and comprises solely Non-Executive Directors. Its other members are Nick Kent and Ken Fry. The Audit Committee meets at least three times a year and has unrestricted access to the Group’s auditor. The Audit Committee met three times during FY 19. The auditor, KPMG LLP, is invited to attend meetings of the Committee on a regular basis. At least once a year, the Committee meets with the auditor without the presence of any Executive Director in order to discuss independently the auditor’s remit and any other issues arising from the audit. The Chief Financial Officer, John Paton, attends meetings at the request of the Committee Chair to facilitate discussion of the financial statements and systems of internal control. The purpose of the Audit Committee is to oversee the Group’s internal financial controls and risk management systems; to recommend the interim and full-year financial results to the Board; and to monitor the integrity of all formal reports and announcements relating to the Company’s financial performance. In addition, the Committee is responsible for appointing the external auditor of the Group, maintaining that relationship and reporting the findings and recommendations of the external auditor to the Board. In order to execute upon its obligation to ensure that the financial performance of the Group is properly measured and reported on, the Committee’s key responsibilities include: • Monitoring the integrity of the Group’s financial statements, including the annual and interim reports and other significant announcements relating to financial performance, and reviewing any significant reporting issues and judgements that they contain; • Advising on the clarity of disclosure and information contained in the financial reports; • Ensuring compliance with relevant accounting standards and reviewing the consistency of the methodology applied; • Reviewing the adequacy and effectiveness of the systems of internal control and risk management; • Overseeing the relationship with the external auditor, reviewing performance and advising the Board members on the auditor’s appointment and remuneration; • Reviewing and discussing the findings of the audit with the external auditor. Annual Report 2019Corporate Governance65 Activities during the Year External Audit Following the Group’s issue of its first set of accounts as a quoted entity last year, FY 19 was a year of good progress with the Committee approving the Group’s interim results in November and overseeing the year-end results process, including the audit of the FY 19 accounts. The Committee considers the appointment of, and the fees payable to, the external auditor. An analysis of the remuneration to the external auditor in respect of audit and non-audit services during the year is set out in note 4 to the consolidated financial statements. In its responsibility to provide assurance over the Group’s control environment and risk management, there was an ongoing focus on risk and controls. In the period, the Group undertook a full review of its financial risks and controls, which the Committee discussed and approved. This review confirmed that the Group’s internal controls are operating adequately and identified a small number of process improvements that will support those controls, the adoption of which the Audit Committee will monitor and oversee. Alongside the audit activities, there is an ongoing process to identify, understand and manage risks faced by the Group. On behalf of the Board, the Committee oversees the risk processes and risk reporting across all business units. The Strategic Report provides further detail on the business risks identified and the mitigating actions being taken by the Group. The Committee takes into account a number of areas when reviewing the external auditor appointment, including the auditor’s performance in discharging the audit, the scope of the audit and terms of engagement, independence and objectiveness. The Board is satisfied that the external auditor remains independent in the discharge of its audit responsibilities. The Committee also reviews the external auditor’s management letter and detailed presentations are made to the Committee by the auditor at least twice a year. There is an active ongoing discussion between the Committee and the auditor on any recommendations to improve the efficiency of the audit process. Committee Attendance Committee member Penny Judd (Chair) Nick Kent Ken Fry John Paton (previous member) Eligible to attend Attendance 3 3 1 2 3 3 1 2 Annual Report 201966 Remuneration Committee The Remuneration Committee makes recommendations on matters relating to performance, remuneration and terms of services for the Board and senior management of the Group. The Committee is also responsible for reviewing all performance- related pay and share incentive schemes in use by the Group. The purpose of these reviews is to ensure: • The appropriateness of the targets and level of rewards set; and • That the dilution of equity arising from such schemes does not exceed the plans defined at the point of the Group’s admission to AIM. Note 21 sets out further details of the shared-based payment schemes of the Group. Committee Governance The Committee is chaired by Nick Kent and comprises solely Non-Executive Directors. Its other members are Ken Fry and Penny Judd, who joined as the third member of the Committee on 14 November 2018. The Remuneration Committee meets as and when necessary, but at least twice a year. The Remuneration Committee met five times during FY 19. Key Responsibilities The Remuneration Committee formulates and recommends to the Board the remuneration policies for Executive Directors, the Chairman of the Board and senior management of the Group. The objective of these policies is to: • Attract, retain and motivate employees of the quality required to run the Group successfully; • Promote the long-term success of the Group; and • Ensure that the performance-related elements of remuneration form a significant, yet appropriate, proportion of the total remuneration package and are transparent, stretching and rigorously applied. Annual Report 2019Corporate Governance67 Activities during the Year Committee Attendance Committee member Nick Kent (Chair) Ken Fry Penny Judd Eligible to attend Attendance 5 5 2 5 5 2 During the course of the year the main activities of the Committee were: • Reviewing the performance of the Executive Directors, Chairman and senior management of the Group, taking into account the achievement of FY 19 performance targets and associated share awards, as well as the FY 20 performance targets, potential share awards and salary increases; • Undertaking a benchmark exercise of remuneration in AIM companies of a similar size, and that of competitor companies based upon information available in the public domain. The Committee did not consider it necessary to engage any external studies during the year; • Reviewing and authorising minor changes to share scheme documentation and standardising performance criteria for the senior management of the Group; • Assessing the effectiveness and appropriateness of the remuneration policy in the light of the overall performance of the business in FY 19 and future growth plans; and • Reviewing the QCA Remuneration Committee Guide for Small and Mid-Sized Quoted Companies, together with other regulations’ guidelines, to ensure that the Company provides clear and transparent remuneration information to shareholders, and is adopting good corporate governance practice. Annual Report 201968 Remuneration Committee continued Remuneration Policy Based on the activities undertaken as described on pp 66-67, the Committee considers that the remuneration policy put in place at the time of AIM admission, together with the targets and awards as updated during the year, are appropriate for the business going forwards. The Committee considers that this balance of fixed and variable pay aligns well with the Group’s growth objectives and risk policy. Key elements of remuneration of the Executive Directors and senior management of the Group Base Salary Base salary is reviewed annually and takes account of the responsibilities, experience and performance of the individual Pensions and Benefits Contribution to a defined contribution pension scheme, maternity/paternity pay and other ancillary benefits Share Incentives As part of its AIM admission, the Group put in place a management incentive plan under which selected individuals are awarded share options at nominal value, but with performance criteria that align their interests with those of shareholders. The performance criteria are described below Performance Criteria The criteria for the award of share incentives to the Executive Directors and senior management of the Group are four-fold, depending on the individual and their role: 1. The Group achieving adjusted EPS growth of 15% or more to trigger a maximum award, or 10% to trigger a 66% award, with a linear application of awards between these levels; 2. The Group achieving a total shareholder return (“TSR”) over three years in excess of the mean TSR delivered by a peer group of comparable companies; 3. Personal adherence to corporate values and risk policy; 4. Specific business unit EBITDA, or other personal targets and goals. The criteria will be applied by the Committee in assessing an individual’s performance, as relevant. The Committee believes that the substantial equity awards available under the management incentive plan, up to a maximum of 10% dilution of the issued share capital over three years, are an important element of remuneration and motivate the Group’s senior management to drive the business forward and deliver the planned growth over the long term. The Committee considers that the performance criteria selected relate closely to the Group’s key performance indicators. Annual Report 2019Corporate Governance69 Performance for the Year Policy for the Remuneration of Employees The Board recognises the vital importance of attracting and retaining the highest calibre of consultants, and strongly supports the management’s remuneration policy for employees. All employees receive a fixed salary that is competitive with the market; a profit share scheme that is a team-based cash bonus based upon achieving financial targets; and a progressive benefits package. In addition, the Group makes a nominal equity award to all employees on joining. The Board believes that this structure provides a compelling remuneration package that reinforces teamwork, aligns the employees with the Group’s objectives and helps to promote a feeling of ownership among all employees. Note 21 sets out further the details of the employee incentive plan. The performance of the Group since AIM admission, and over the course of FY 19, as described in the Chairman’s, the Global Chief Executive Officer’s and the Chief Financial Officer’s reports on pp 2-4, 5-9 and 86-89 respectively, has been very pleasing. The Group has met or exceeded both Company projections and market expectations; in particular, exceeding the 15% EPS growth target. Consequently, the majority of individuals’ bonus and share incentive performance criteria have been met for FY 19. However, as all share awards have three-year performance conditions, none of the options have vested at this point. The Committee expects that, should the current performance trajectory continue, the majority (if not all) of equity dilution related to the equity awards and planned at the time of AIM admission, that is approximately 3.33%, will occur in due course. This projection includes the smaller quantum awards granted to all employees of the Group. Non-Executive Directors’ Fees The Chairman of the Board and the two Non-Executive Directors receive an annual fee for their services, which is reflective of their level of experience, knowledge and responsibility. The fees payable to the Non-Executive Directors are reviewed and benchmarked annually. Annual Report 201970 Remuneration Committee continued Summary of Directors’ Remuneration The table has been audited and below represents the Directors’ remuneration for the years ended 31 March 2019 and 31 March 2018: Euan Fraser John Paton Ken Fry Penny Judd Nick Kent Total Awards of Equity Salary £’000s Bonus £’000s Pension £’000s 2019 £’000s 530 195 65 50 50 890 – 50 – – – 50 5 2 – – 1 8 584 249 65 50 51 999 2018 £’000s 511 20 30 4 51 616 There were limited awards of equity in the period 1 April 2018 to 31 March 2019 as the shares awarded at AIM admission covered the 18-month period up to 31 March 2019. The following table has been audited and sets out the Directors’ share interests and awards during FY 19: Euan Fraser John Paton22 Ken Fry Penny Judd Nick Kent Total Number of 0.00075p Ordinary Shares Held 1,356,081 37,639 34,090 – 995,520 2,423,330 Number of un-vested Share Options Held Number of share options awarded in 2019 Share Price of 2019 Grant 250,000 54,133 – – – – 22,883 – – – 304,133 22,883 – £2.19 – – – 22 The share award and bonus payment to John Paton follows the successful completion of his probationary period Annual Report 2019Corporate Governance71 Directors’ Service Agreements The Executive Directors entered into service agreements with the Company on the following dates: Director Date of Service Agreement Term Notice period Euan Fraser 5 October 2017 Indefinite 6 months John Paton 28 February 2018 Indefinite 6 months The Non-Executive Directors do not have service agreements; however, their letters of appointment provide that their tenure of office has an initial period of three years, and will continue until terminated by the Non-Executive Director or the Company on giving to the other three months’ prior written notice. Each Non-Executive Director is typically expected to serve for two three-year terms; but may by invited by the Board to service for an additional period. Director Ken Fry Date of Office Initial Period Notice period 5 October 2017 3 years 3 months Penny Judd 28 February 2018 3 years 3 months Nick Kent 5 October 2017 3 years 3 months By order of the Board. Nick Kent Chair of the Remuneration Committee 5 June 2019 Annual Report 201972 Nomination Committee The Nomination Committee leads the process for Board appointments and making recommendations to the Board about its composition. Committee Governance The Committee is chaired by the Chairman of the Board, Ken Fry; its other members are Penny Judd and Euan Fraser. In the event that the matter under discussion is the Chair’s own succession, the Committee will be chaired by an independent Non-Executive Director. The Nomination Committee meets as and when necessary, but at least twice a year. The Nomination Committee met two times during FY 19. Key Responsibilities The purpose of the Nomination Committee is to keep under review the structure, size and composition of the Board, as well as succession planning for the Directors. It leads the process for identifying and nominating, for approval by the Board, candidates to fill Board and committee vacancies. In accordance with its Terms of Reference, the Committee develops and maintains a rigorous and transparent approach for recommending appointments and reappointments to the Board. Its primary responsibilities in this area include: • Identifying and nominating for approval by the Board candidates to fill Board vacancies as and when they arise; • Ensuring the necessary due diligence and conflicts of interest checks have been undertaken before an appointment is made; • Monitoring whether satisfactory induction is provided to new Directors regarding their knowledge of the Group, and their Board and committee responsibilities; and • Reviewing the results of the Board evaluation process and ensuring that the conclusions are captured and actioned where necessary. Activities during the Year One of the Committee’s principal roles is to ensure that the Group has appropriate succession planning in place. During the year, the Nomination Committee discussed contingency and succession plans for the members of the Board. This will remain an ongoing focus area. As part of the Board’s commitment to maintaining a strong corporate governance framework, the Committee reviewed the approach to, and results of, the Board’s performance evaluation process. Following that review, the Committee continues to believe that the Board, its sub-committees and the Directors individually operate an optimal structure to secure future growth while protecting the Group’s unique culture. • Regularly reviewing the structure, size and composition of the Board to ensure that it has an appropriate balance of skills, independence, knowledge, experience and diversity; • Considering succession planning for the Board Directors and senior executives, taking into account the challenges and opportunities facing the Company and wider Group, along with skills and expertise that may be required in the future; Other key activities included assessing the composition of the committees, which led to the Board approving a number of governance changes. Penny Judd joined the Remuneration Committee and Ken Fry joined the Audit Committee, with John Paton stepping down from the Audit Committee in order that it comprises solely Non-Executive Directors. Annual Report 2019Corporate Governance73 Diversity Committee Attendance In executing its duties, the Nomination Committee objectively considers candidates on merit and with due regard for the benefits of diversity, including gender diversity, on the Board. Committee member Ken Fry (Chair) Euan Fraser Penny Judd Eligible to attend Attendance 2 2 2 2 2 2 Alpha is an equal opportunities employer and the Group’s policy is to ensure that all employees, or those seeking employment, are treated fairly. This policy applies at Board level and across the Group widely. All decisions relating to recruitment, selection and promotion are made objectively regardless of race, ethnicity, nationality, gender, sexual orientation, religious belief, political opinion, age or disability. The Nomination Committee is able to monitor the implementation of the Group’s policy through the activities of the Diversity & Inclusion programme, which is described in the Corporate Social Responsibility report on pp 44-45. Annual Report 201974 Directors’ Report The Directors present their Annual Report and the audited consolidated financial statements of Alpha Financial Markets Consulting plc (the “Company”, the “Group”), registered number 09965297, for the year ended 31 March 2019. The Directors believe that the requisite components of this report are set out elsewhere in the Annual Report and/or on the Company’s website, investors.alphafmc.com. The table sets out where the necessary disclosures can be found. The Company was incorporated on 22 January 2016 and began trading on 3 February 2016 on the acquisition of Alpha FMC Group Holdings Limited. The registered office is 60 Gresham Street, London EC2V 7BB. Principal Activities Results Dividends Alpha Financial Markets Consulting plc is the holding company for a global group of companies, the principal activity of which is the provision of consulting and related services to clients in the asset and wealth management industry. A review of the performance and future development of the Group’s business is contained in the Chairman’s, the Global Chief Executive Officer’s and the Chief Financial Officer’s reports on pp 2-4, 5-9 and 86-89 respectively. The financial results for the year ended 31 March 2019 are set out in the Chief Financial Officer’s report on pp 86-89, in the consolidated statement of comprehensive income on p. 84 and further commented upon in the Global Chief Executive Officer’s report on p 9. The Directors consider the current state of affairs of the Group to be satisfactory. Information regarding dividend payments can be found in the notes to the consolidated financial statements on p. 107. Articles of Association A copy of the full Articles of Association are available upon written request from the Company Secretary. Directors Directors that have served during the year and summaries of the current Directors’ key skills and experience are set out in the Corporate Governance report on pp 60-61. Directors’ Interests Details of the Directors’ beneficial interests are set out in the Remuneration report on p. 70. Qualifying Third-Party Indemnities Share Capital The Company may indemnify a Director against all losses and liability that they may sustain in the execution of the duties of their office, except to the extent that such an indemnity is not permitted by sections 232 or 234 of the Companies Act. Subject to section 205(2) to (4) of the Companies Act, the Company may provide a Director with funds to meet his expenditure in defending any civil or criminal proceedings brought or threatened against him or her in relation to the Company. The Company may also provide a Director with funds to meet expenditure incurred in connection with proceedings brought by a regulatory authority. Details of the issued share capital, together with movements in the Company’s issued share capital during the year, are shown in the consolidated statement of changes in equity on p. 93 and note 20 to the consolidated financial statements. The Company has only one class of ordinary share, which carries no right to fixed income and each ordinary share is entitled to one vote at general meetings of the Company. Annual Report 2019Corporate Governance75 Major Interests in Shares In accordance with the Financial Conduct Authority’s Disclosure and Transparency Rules, following the above the Company has 101,974,874 Ordinary Shares in issue, 387,740 of which are held in treasury. The total number of voting rights in the Company is 101,110,928. On 31 March 2019, the Company was aware or had been notified, in accordance with chapter five of the Disclosure and Transparency Rules, of the following voting rights as a shareholder of the Company: Name of person(s) subject of notification Janus Henderson Investors Merian Global Investors Fidelity International JP Morgan Asset Management M&G Investment Management SVM Asset Management Nordea Asset Management Danske Capital Aberdeen Standard Investments Schroder Investment Management Jupiter Asset Management Aviva Investors Percentage of voting rights and issued share capital 8.21 7.11 6.59 6.42 5.06 4.58 4.51 4.22 3.95 3.73 3.54 3.27 Financial Risk Management Going Concern The Group has established internal control and risk management structures in relation to the process for preparing the consolidated financial statements. The key features of this framework are described in the Strategic Report and in notes 23 and 24 of the notes to the consolidated financial statements. The Directors have considered the going concern status of the Company and are satisfied that the Company remains a going concern. Details of the going concern basis are set out in note 1 of the notes to the consolidated financial statements. Further commentary can be found in the Chief Financial Officer’s report on pp 86-89. Disclosure of Information to Auditor In the case of each of the persons who are Directors of the Company at the date when this report was approved: So far as each of the Directors is aware, there is no information relevant to the audit of which the Company’s auditor is unaware; and Each of the Directors have taken all the steps that he or she ought to have taken as a Director to make him or herself aware of any information relevant to the audit and to establish that the Company’s auditor is aware of that information. Auditor The auditor, KPMG LLP, has indicated its willingness to continue in office and a resolution seeking to reappoint KPMG LLP as the Group’s auditor will be proposed at the AGM. Post Balance Sheet Events There are no post balance sheet events to be disclosed. Annual General Meeting Details of the forthcoming AGM can be found on p. 59 of the Corporate Governance report. Annual Report 201976 Directors’ Report continued Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report, and the Group and parent company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent company financial statements for each financial year. As necessitated by AIM Rules of the London Stock Exchange, they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the EU (IFRSs as adopted by the EU) and applicable law, and have elected to prepare the parent company financial statements on the same basis. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to: • Select suitable accounting policies and then apply them consistently; • Make judgements and estimates that are reasonable, relevant and reliable; • State whether they have been prepared in accordance with IFRSs as adopted by the EU; • Assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • Use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company, and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a Report of the Directors that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors’ Report comprising pp 74-76 of the Annual Report has been approved by the Board of Directors of Alpha Financial Markets Consulting plc. By order of the Board. John Paton Chief Financial Officer & Company Secretary 5 June 2019 Annual Report 2019Corporate Governance77 “ Alpha has one of the highest quality of people I have seen.” Chief Operating Officer, investor services firm Annual Report 201978 Independent Auditor’s Report 1. Our opinion is unmodified We have audited the financial statements of Alpha Financial Markets Consulting plc (the "Company", the "parent company") for the year ended 31 March 2019, which comprise the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity, Company statement of financial position, Company statement of cash flows, Company statement of changes in equity, and the related notes, including the accounting policies in note 1. Overview Materiality: Group financial statements as a whole Coverage Key audit matters Recurring risks In our opinion: • The financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March 2019 and of the Group’s profit for the year then ended; • The Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU); • The parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and • The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. £0.6m (2018:£0.5m) 4.8% (2018: 4.6%) of Group Profit before Tax 98% (2018:99%) of Group Profit before Tax vs 2018  Revenue recognition in the appropriate period, recognition of accrued income and existence of trade receivables at the year end Parent company: Recoverability of investments in subsidiaries and intercompany debtors  2. Key audit matters: including our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters in arriving at our audit opinion above. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. Annual Report 2019Corporate Governance79 Revenue recognition in the appropriate period, recognition of accrued income and recognition of trade receivables at the year end (Trade receivables £16.6 million; 2018: £17.8m million Accrued income £1.5 million; 2018: £3.3 million) Refer to p. 94 (accounting policy) and p. 102 (note 2) and p. 112 (note 15) (financial disclosures). Recoverability of investments in subsidiaries and intercompany debtors (£1.3m and £110.3m, 2018: £1.3m and £92.4m) Refer to p. 94 (accounting policy) and p. 112 (note 16) and p. 117 (note 23) (financial disclosures). The risk Manipulation of revenue recognition on contracts around their year end: For the majority of contracts, billing is on a time and materials basis. There is a risk that revenue might be manipulated such that it does not reflect hours worked and the services provided and in particular that accrued income and trade receivables recorded at the year end do not exist. Our response Our procedures included: • Tests of detail: we have performed tests of detail, which comprised: 1. Selection of a sample of items included in trade receivables at 31 March 2019 and vouching: amounts recorded to invoices; that hours recorded on the invoice match timesheet records; and that contracts with the customer are in place for the work performed. 2. Selection of a sample of items included in accrued income at 31 March 2019 and vouching; that amounts accrued agree to hours recorded on timesheet records that have not been invoiced; that contracts with the customer are in place for the work performed; and that amounts accrued have been invoiced post year end. 3. Challenging the recoverability of trade receivables and accrued income as at 31 March 2019 by reference to a sample of credit notes after the year end. Low risk, high value Our procedures included: The carrying amount of the parent company’s investments in subsidiaries and intercompany debtors represents 100% (2018: 100%) of the Company’s total assets. Their recoverability is not at a high risk of significant misstatement or subject to significant judgement. However, due to their materiality in the context of the parent company financial statement, this is considered to be the area that had the greatest effect on our overall parent company audit. • Test of detail: Compared the carrying amount of 100% of investments of the total investment balance with the relevant subsidiaries’ draft balance sheets to identify whether their net assets, being an approximation of their minimum recoverable amount, were in excess of their carrying amount and assessing whether those subsidiaries have historically been profit-making. • Assessing subsidiary audits: Considering the results of our audit work on the profits and net assets of those subsidiaries. Annual Report 201980 Independent Auditor’s Report continued 3. Our application of materiality and an overview of the scope of our audit Group Profit before Tax £12.5m (2018: £10.9m) Group Materiality £0.6m (2018: £0.5m) Materiality for the Group financial statements as a whole was set at £0.6m, determined with reference to a benchmark of Group profit before tax of which it represents 4.8% (2018 4.6% of normalised Group profit before tax). Materiality for the parent company financial statements as a whole was set at £0.475m (2018: £0.15m), determined with reference to a benchmark of Company gross assets of £111.7m (2018: £93.9m), of which it represents 0.4% (2018:0.2%). We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.03m (2018: £0.025m), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group’s 15 (2018: 15) reporting components, we subjected 10 (2018: 10) in the UK, France and USA (2018: UK, France and USA) to full scope audits for Group purposes and 0 (2018: 0) to specified risk-focussed audit procedures. We conducted reviews of financial information (including enquiry) at a further 5 (2018: 5) non-significant components.The component materialities ranged from £0.275m to £0.475m (2018: £0.275m to £0.450m), having regard to the mix of size and risk profile of the Group across the components. The components within the scope of our work accounted for the percentages described below. The remaining 12% (2018: 10%) of total Group revenue, 2% (2018: 5%) of total profits and losses that made up Group profit before tax and 4% (2018: 3%) of total Group assets is represented by 5 reporting components (2018: 5 components), none of which individually represented more than 5% of any of total Group revenue, of total profits and losses that made up Group profit before tax or total Group assets. For these residual components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no significant risks of material misstatement within these. £0.6m Whole financial statements materiality (2018: £0.5m) £0.5m Range of materiality at 10 components (£0.45m-£0.50m) (2018: £0.275m-£0.45m) £0.03m Misstatements reported to the audit committee (2018: £0.025m) Profit before tax Group materiality 4. We have nothing to report on going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (the “going concern period”). Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this Audit Report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this Auditor’s Report is not a guarantee that the Group or the Company will continue in operation. Annual Report 2019Corporate Governance81 In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period were: Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work, we have not identified material misstatements in the other information. • The impact of Brexit on the Group’s customers. Strategic Report and Directors’ Report Based solely on our work on the other information: As these were risks that could potentially cast significant doubt on the Group’s and the Company’s ability to continue as a going concern, we considered sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of reasonably possible (but not unrealistic) adverse effects that could arise from these risks individually and collectively, and evaluated the achievability of the actions the Directors consider they would take to improve the position should the risks materialise. We also considered less predictable but realistic second order impacts, such as the impact of Brexit and the erosion of customer or supplier confidence, which could result in a rapid reduction of available financial resources. Based on this work, we are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements. We have nothing to report in these respects, and we did not identify going concern as a key audit matter. • We have not identified material misstatements in the • • Strategic Report and the Directors’ Report; In our opinion the information given in those reports for the financial year is consistent with the financial statements; and In our opinion those reports have been prepared in accordance with the Companies Act 2006. 6. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: • Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • The parent company financial statements are not in agreement with the accounting records and returns; or • Certain disclosures of Directors’ remuneration specified by law are not made; or • We have not received all the information and explanations we require for our audit. 5. We have nothing to report on the other information in the Annual Report We have nothing to report in these respects. The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Annual Report 201982 8. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters that we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Mark Flanagan (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 31 Park Row Nottingham NG1 6FQ 5 June 2019 7. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on p 76, the Directors are responsible for: the preparation of the financial statements, including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. Annual Report 2019Corporate Governance83 “ Alpha consistently hires high-calibre, like-minded individuals, creating a great environment that encourages everyone to perform to their best.” Alpha employee Annual Report 201986 Chief Financial Officer’s Report 90 Consolidated statement of comprehensive income 91 Consolidated statement of financial position 92 Consolidated statement of cash flows 93 Consolidated statement of changes in equity 94 Notes to the consolidated financial statements 119 Company statement of financial position 120 Company statement of cash flows 121 Company statement of changes in equity 122 Notes to the Company financial statements Financial StatementsThe power of our people tocreate value86 Chief Financial Officer’s Report Alpha continued to internationalise, delivering growth of 15.1% to Group revenue, 18.0% to adjusted EBITDA and 23.0% to adjusted EPS, with improved operating profit and adjusted EBITDA margins, while investing in the business. Group Results I am pleased to report that Alpha has delivered further good growth in its second full-year results following admission to trading on AIM in October 2017. Revenue The Group has delivered a strong year of progress. Reflective of Alpha’s successful expansion strategy, Group revenue for FY 19 increased to £76.0m, representing a 15.1% increase on the prior 12 months. Alpha Europe & Asia delivered the strongest regional growth, with improved contributions across the region; including excellent growth in France and Switzerland, and Singapore where revenues doubled in the year. The UK, Alpha’s largest geography, also grew over 10% on the strong prior year, enjoying a better first than second half this year, having normalised consultant utilisation levels from the start of the year and witnessing some political uncertainty impacts pre March on client decision making. The US business consolidated its progress, adding new clients and strengthening the team; and while lower utilisation reduced margins, Alpha US continues to be well positioned. John Paton Chief Financial Officer 5 June 2019 “Alpha has delivered a year of good growth, improved margins and increased cash generation, and we look forward to further progress.” Annual Report 2019Financial Statements87 Revenue Gross Profit Adjusted EBITDA Adjusted Operating Profit Operating Profit Net Cash Flow from Operations 12 months to 31 March 2019 12 months to 31 March 2018 £76.0m £29.1m £16.5m £16.2m £12.6m £16.4m £66.0m £25.3m £14.0m £13.7m £8.6m £11.3m Change 15.1% 15.1% 18.0% 18.6% 46.9% 44.4% Alpha’s growth has been driven by continuing strong demand in its established practices, including Front Office, Distribution, M&A Integration and Operations & Outsourcing, as well as progress in newer practices, including Digital and Regulatory Compliance. Alpha’s growth is supported by further investment in the global consultant headcount, with the number of consultants (including contractors) reaching 362 by the year end (March 2018: 305). Group Profitability The Group also increased its profits. Gross profit rose to £29.1m (FY 18: £25.3m), maintaining Group gross profit margin at 38.3% (FY 18: 38.3%), which reflects a combination of target consultant utilisation levels and continued investment in the business, offset by margin benefit from consultancy mix, headcount growth and the timing of some prior year accruals. Group overhead costs, before the adjusting items detailed in note 5 of the consolidated financial statements, increased 11.6% in the year to £12.6m (FY 18: £11.3m). This change includes increased recruitment spend required to deliver consultant headcount growth, additional support to the Group management team, technology improvement spend, new office space, other staff related costs and professional fee increases from Alpha’s first full year of being a publicly quoted company. Including these adjusting items, total overhead costs reduced slightly to £16.5m (FY 18: £16.7m). The Group also reported £16.5m adjusted EBITDA (FY 18: £14.0m), representing an increase of 18.0% on the prior year. Adjusted EBITDA margin also edged higher to 21.7% (FY 18: 21.2%). Adjusted operating profit increased to £16.2m (FY 18: £13.7m). Total Group operating profit increased 46.9% to £12.6m (FY 18: £8.6m) after charging depreciation, intangible amortisation costs, one-off costs and other non-operational items. Adjusted EBITDA excludes these expense items to give better clarity on the underlying performance of the Group. These cost adjustments, which are detailed in note 5 of the consolidated financial statements, reduced to £3.6m (FY 18: £5.1m) due to the comparative period also including AIM admission, acquisition and previous restructuring costs. The share-based payment charge increased in the current year reflecting a full year charge, including relevant social security costs, new awards and updated valuation assumptions. Please see notes 5 and 21 for further details. Currency Currency translation had a minimal impact on both sales and profits in FY 19, as a result of a flat average sterling, against key currencies. In the year, sterling averaged $1.32 (FY 18: $1.32) and €1.13 (FY 18: €1.13). Currency translation immaterially increased FY 19 sales by £0.04m (0.05%). Annual Report 201988 Chief Financial Officer’s Report continued Net Finance Expense Earnings per Share Net finance costs decreased significantly in the year to £0.05m (FY 18: £7.1m), representing the first full financial year since Alpha’s admission to AIM, when the Group repaid or converted to equity all of its previous private equity-related debt. Since its admission to AIM, the Group has operated with a net cash position. Adjusted earnings per share improved 23.0% to 12.05p per share (FY 18: 9.80p) and, after including the adjusting expense items, the basic earnings per share is 9.05p per share (FY 18: 0.49p loss). Adjusted diluted EPS increased 20.1% to 11.77p (FY 18: 9.80p). At the year end, 3,198,286 share options remained outstanding and no share options vested in the year. Taxation The Group’s tax charge was £3.3m (FY 18: £1.9m). The effective tax rate reduced as prior year limits on tax deductibility of interest costs under the previous capital structure receded. The Group’s cash tax payment in the year was £2.0m (FY 18: £1.2m). Adjusted profit after tax is shown using a blended rate of the jurisdictions in which the Group operates to better indicate the Group’s expected ongoing tax position. For further taxation details, see notes 9 and 10 to the consolidated financial statements. Cash Flow, Statement of Financial Position and Net Funds The Group enjoyed strong cash generation with net cash generated from operating activities rising to £16.4m (FY 18: £11.3m). This represents a 101% adjusted cash conversion rate from adjusted operating profit, improving on the FY 18 adjusted cash conversion rate of 83%, which reflects an increased working capital focus throughout the year and improving internal process rigour around timely debtor collection. 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. In the prior year, the Group acquired 100% of the share capital of TrackTwo, a Germany-based consulting and data solutions business, and its product 360 SalesVista. This business, which now forms part of the Alpha Data Solutions proposition, has made good progress in the year, adding two new clients, and is enjoying a strong new business pipeline. Alpha continues to invest in the product suite to both strengthen the 360 SalesVista technology infrastructure and add more functionality to position the product for further opportunities and scalable growth. The Group’s income tax paid totalled £2.0m (FY 18: £1.2m). Deferred consideration for TrackTwo of €1.1m was paid in the year, having paid the initial consideration in the prior year. The increase in capital expenditure in the year reflects investment in Alpha’s 360 SalesVista product. The prior year’s cash flow also reflects the equity proceeds raised on admission to AIM and repayment of the Group’s outstanding debt. Net cash interest paid reduced to £0.05m (FY 18: £5.5m), reflecting the cost of maintaining the Group’s undrawn revolving credit facility and net cash balances through the year. The Group maintains a £5.0m committed revolving debt facility that expires in October 2020. At the year end, the Group’s cash position had improved significantly to £18.6m (FY 18: £9.8m). Annual Report 2019Financial Statements89 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 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. While cognizant of potential macro-economic risks and the competitive environment, the Group has ongoing demand and opportunities where it can support both existing and new clients into the new financial year. The Group has continued to invest and innovate, developing Alpha’s service offerings while continuing to expand internationally, which should position Alpha well for the year ahead. The Board has considered all of the above factors in its review of going concern and has been able to conclude the review satisfactorily. Alpha has delivered a year of good growth, improved margins and increased cash generation, and we look forward to further progress in the year ahead. Dividends The Board is recommending a final dividend of 4.09p per share (FY 18: 3.69p). If approved at the Annual General Meeting on 4 September 2019, the final dividend will be paid on 11 September 2019 to shareholders on the register on 30 August 2019. Together with the FY 19 interim dividend of 1.91p per share, the dividends for the year will total 6.00p per share. This is consistent with the Group’s stated policy of paying dividends of approximately 50% of profit after tax, which continues to be calculated this year on an adjusted basis. Total Shareholders’ Funds Total shareholders’ funds increased to £89.1m (March 2018: £82.7m). 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, equity settled consideration and the payment of dividends. At 31 March 2019, the Company had 101,974,874 ordinary shares in issue, of which 387,740 shares were held in treasury. Risk Management and the Year Ahead The Group delivered a good financial performance in FY 19 and ended the year with a strong balance sheet. Although some uncertainty exists in our political and market environments, 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 myself as Chief Financial Officer and the Global Chief Executive Officer, has primary responsibility for keeping abreast of developments that Annual Report 201990 Consolidated statement of comprehensive income For the year ended 31 March 2019 Continuing operations Revenue Cost of sales Gross profit Administration expenses Operating profit Depreciation Adjusting items Adjusted EBITDA Finance income Finance expense Profit before tax Taxation Profit/(loss) for the year Exchange differences on translation of foreign operations Total comprehensive income/(expense) for the year Basic earnings/(losses) per ordinary share (p) Diluted earnings/(losses) per ordinary share (p) Adjusted basic earnings per ordinary share (p) Adjusted diluted earnings per ordinary share (p) Year ended 31 March 2019 £’000 Year ended 31 March 2018 £’000 Note 2 4 5 5 8 8 9 12 12 12 12 75,960 (46,878) 29,082 (16,510) 12,572 263 3,643 66,009 (40,748) 25,261 (16,703) 8,558 297 5,114 16,478 13,969 – (52) 12,520 (3,321) 9,199 2,505 11,704 9.05 8.84 12.05 11.77 – (7,059) 1,499 (1,941) (442) (186) (628) (0.49) (0.49) 9.80 9.80 Annual Report 201991 Consolidated statement of financial position As at 31 March 2019 Assets Non–current assets Goodwill Intangible fixed assets Property, plant and equipment Total non–current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Current liabilities Trade and other payables Total current liabilities Net current assets Non-current liabilities Deferred tax provision Other non-current liabilities Total non-current liabilities Net assets/(liabilities) Equity Issued share capital Share premium Capital redemption reserve Foreign exchange reserve Other reserves Retained earnings Total shareholders’ equity Year ended 31 March 2019 £’000 Restated year ended 31 March 20181 £’000 Note 13 13 15 16 17 18 10 19 55,162 20,768 414 76,344 19,680 18,581 38,261 (21,786) (21,786) 16,475 (3,193) (486) (3,679) 89,140 52,626 22,913 397 75,936 21,242 9,774 31,016 (20,621) (20,621) 10,395 (3,401) (277) (3,678) 82,653 20 76 77 89,396 89,396 1 2,095 737 (3,165) 89,140 - (410) 267 (6,677) 82,653 1 Prior year restatements relate to the adoption of new accounting standard, IFRS 15 (please see note 3). The effect of adopting IFRS 15 was immaterial as at 1 April 2017 and therefore, an opening consolidated statement of financial position as at that date has not been presented. The notes on pp 94-118 form part of these consolidated financial statements. These financial statements were approved and authorised for issue by the Board of Directors on 5 June 2019. They were signed on its behalf by: Euan NB Fraser Global Chief Executive Officer John C Paton Chief Financial Officer Annual Report 2019 92 Consolidated statement of cash flows For the year ended 31 March 2019 Cash flows from operating activities: Operating profit/(loss) for the year Depreciation of property, plant and equipment Loss on disposal of fixed assets Amortisation of intangible fixed assets Share-based payment charge Acquisition related costs Costs relating to AIM admission Operating cash flows before movements in working capital Working capital adjustments: (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Tax paid Net cash generated from operating activities Cash flows from investing activities: Interest received Acquisition of subsidiary Costs relating to AIM admission Costs relating to acquisitions Capital expenditure Net cash used in investing activities Cash flows from financing activities: Issue of ordinary share capital Repayment of borrowings New borrowings Interest paid Investor loan note interest Repayment of preference shares Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of the period Year ended 31 March 2019 £’000 Year ended 31 March 2018 £’000 12,572 263 6 2,586 436 61 – 15,924 1,562 878 (1,996) 16,368 – (1,113) – – (728) (1,841) 8,558 297 – 2,383 191 241 1,621 13,291 (8,839) 8,107 (1,222) 11,337 – (1,941) (892) (242) (243) (3,318) – – – 34,348 (33,602) – (45) (5,469) – – (5,687) (5,732) 8,795 9,774 12 18,581 – – (1,508) (6,231) 1,788 8,023 (37) 9,774 Annual Report 201993 Consolidated statement of changes in equity For the year ended 31 March 2019 As at 1 April 2017 IFRS 15 adjustment As at 1 April 2017 – Restated Comprehensive income Loss for the period Foreign exchange differences on translation of foreign operations Transactions with owners Shares issued (equity) Share-based payment reserves Consideration to be settled in equity Dividends As at 31 March 2018 – Restated As at 1 April 2018 Comprehensive income Profit for the period Foreign exchange differences on translation of foreign operations Transactions with owners Shares cancelled (equity) Share-based payment reserves Consideration to be settled in equity Dividends As at 31 March 2019 Share Capital £’000 Share premium £’000 Capital redemption reserve £’000 Foreign exchange reserve £’000 Other reserves £’000 – – – – – 86 – 86 – – 77 89,310 – – – 77 77 – – (1) – – – – – – 89,396 89,396 – – – – – – 76 89,396 – – – – – – – – – – – – – 1 – – – 1 (224) – (224) – (186) – – – – (410) (410) – 2,505 – – – – 2,095 – – – – – – 191 76 – 267 267 – – – 409 61 – 737 Retained earnings £’000 (4,408) (319) (4,727) Total £’000 (4,546) (319) (4,865) (442) (442) – – – – (1,508) (6,677) (186) 89,387 191 76 (1,508) 82,653 (6,677) 82,653 9,199 9,199 – – – – 2,505 – 409 61 (5,687) (3,165) (5,687) 89,140 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. 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. Annual Report 201994 Notes to the consolidated financial statements 1. Basis of Preparation and Significant Accounting Policies General information The principal activity of the Group is the provision of consulting and related services to clients in the asset and wealth management industry, principally in the UK, USA, Europe and Asia. Alpha Financial Markets Consulting plc is incorporated in England and Wales with registered number 09965297. The Company’s registered office is 60 Gresham Street, London, EC2V 7BB. The Company is a public limited company and is listed on the AIM of the London Stock Exchange. The consolidated financial statements were authorised for issue in accordance with a resolution of the Directors on 5 June 2019. Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and interpretations issued by the IFRS Interpretations Committee. These financial statements have been prepared under the historical cost basis, except for certain financial instruments that are measured at fair value. The presentational currency of these financial statements and the functional currency of the Group is pounds sterling. All amounts in these financial statements have been rounded to the nearest £1,000. Going concern The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. The Group’s forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Group has sufficient financial resources, together with assets that are expected to generate cash flow in the normal course of business. Accordingly, the Directors have adopted the going concern basis in preparing these consolidated financial statements. See note 23 for the financial risks facing the Group. Basis of consolidation These financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 31 March 2019. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Principal accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below: Significant judgements and estimates The preparation of financial information in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Annual Report 201995 The estimates and associated assumptions are based on historical experience and various other factors that are deemed to be reasonable under the circumstances. The results form the basis of making the judgements about carrying values of assets and liabilities that are not apparent from other sources. Actual results can differ from these estimates. The only judgement or estimate that has a significant impact in the year ended 31 March 2019 is noted below: Share-based payments (see note 21) Management have estimated the share-based payments expense under IFRS 2. In determining the fair value of share-based payments, management have considered several internal and external factors in judging the probability that management and employee share incentives may vest. Such judgements involve estimating a number of future performance and other factors. The fair value calculations have been externally assessed for reasonableness in the current and prior period. Investments in subsidiaries Investments in subsidiaries are stated at cost less any provision for impairment. Property, plant and equipment All property, plant and equipment are stated at historical cost (or deemed historical cost) less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value on a straight-line basis at the following annual rates: Tangible fixed asset Useful economic life Leasehold improvements Fixture and fittings Computer equipment 3–10 years 4 years 3–5 years Useful economic lives and estimated residual values are reviewed annually and adjusted as appropriate. Business combinations and goodwill Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Identifiable assets acquired, and liabilities assumed in a business combination, are measured at their fair values at the acquisition date. Goodwill arises when the fair value of the consideration for a business exceeds the fair value of the net assets acquired. In determining the fair value of intangible assets arising on business combination, management are required to make judgements regarding the timing and amount of future cash flows applicable to the intangible assets being acquired, discounted using an appropriate discount rate. Such judgements are based on current budgets and forecasts, extrapolated for an appropriate period, taking into account growth rates and expected changes to selling prices and operating costs. Management estimates an appropriate discount rate using post-tax rates that reflect current market assessments of the time value of money and the risks specific to the businesses being acquired (see note 13). Goodwill is initially recognised and measured as set out above. Goodwill is not amortised but is reviewed for impairment at least annually. Intangible assets Intangible assets acquired in a business combination are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any impairment losses. Annual Report 201996 Notes to the consolidated financial statements continued 1. Basis of Preparation and Significant Accounting Policies continued Intangible assets acquired as part of a business combination Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset under IAS 38. Such assets are only recognised if either: • They are capable of being separated or divided from the Company and sold, transferred, licenced, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the company intends to do so; or • They arise from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations. The cost of such intangible assets is their fair value at the acquisition date. All intangible assets acquired through business combination are amortised over their estimated useful lives. The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of the intangibles acquired in business combinations are as follows: Intangible asset Useful economic life Valuation method Customer relationships 11–12 years Multi-Period Excess Earnings method Intellectual property Trade name 7 years 15 years Relief from Royalty method Relief from Royalty method Acquisition costs Costs related to acquisition, other than those associated with the issue of debt or equity securities that the Group incurs in connection with a business combination, are expensed as incurred. If the contingent consideration is classified as equity, it is not re-measured, and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in the statement of comprehensive income. The TrackTwo earn-out expense calculation under IFRS 3 contains estimation uncertainty as it relates to future performance. Management have assessed the potential future cash flows of the TrackTwo business, the likelihood of an earn-out payment being made and discounted using an appropriate discount rate (see note 14). Customer relationships 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, discount factors and contributory asset charges used. A useful economic life of 11–12 years has been deemed appropriate based on the average realisation rate of cumulative cash flows and benchmarked data. Projected cash flows have been discounted over this period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income. There are 8.8 years and 9.3 years remaining to be amortised for the customer relationships in relation to Alpha FMC Group Holdings Limited and TrackTwo respectively. Intellectual property 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. There are 3.8 years and 5.3 years remaining to be amortised for the intellectual property in relation to Alpha FMC Group Holdings Limited and TrackTwo respectively. Trade name 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 15 years has been deemed appropriate based on benchmarking reviews. Projected cash flows have been discounted over this period. Annual Report 201997 The amortisation charge is recognised in administrative expenses within the statement of comprehensive income. There are 11.8 years remaining to be amortised for the trade name in relation to Alpha FMC Group Holdings Limited. Impairment reviews – goodwill For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually or, more frequently, when there is an indication that the unit may be impaired. The Group performs impairment reviews at the reporting period end to identify any goodwill or intangible assets that have a carrying value that is in excess of its recoverable value. Determining the recoverability of goodwill and intangible assets requires judgement in both the methodology applied and the key variables within that methodology. Where it is determined that an asset is impaired, its carrying value will be reduced to its recoverable value with the difference recorded as an impairment charge in the income statement. In accordance with IFRS 1, the Group has tested goodwill for impairment at the balance sheet date. No goodwill impairment was deemed necessary at 31 March 2019. Capitalised development costs Capitalised development costs represent the costs incurred in the development enhancements to the 360 SalesVista software in 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. Impairment of investment in subsidiaries The uncertainties described above in respect of the potential impairment of goodwill in the Group consolidated financial statements also represent uncertainties regarding the carrying value of the investment in Alpha FMC Group Holdings Limited in the Company financial statements. As at 31 March 2019, the carrying value of this investment was £1.3 million. Foreign exchange Transactions in foreign currencies are translated to the Group companies’ functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in the consolidated statement of income. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency, pound sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in other comprehensive income. Financial instruments The Group uses financial instruments comprising cash and cash equivalents, preference shares and other short-term instruments, such as trade payables that arise from its operations. The main purpose of these financial instruments is to fund the Group’s business strategy and working capital requirements. Accounting policies in respect of financial instruments are outlined below. Financial assets A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Annual Report 201998 Notes to the consolidated financial statements continued 1. Basis of Preparation and Significant Accounting Policies continued Financial assets continued An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. For financial instruments measured at cost less impairment, impairment is calculated as the difference between its carrying amount and the best estimate of the amount that the Group would receive for the asset if it were to be sold at the reporting date. Interest on the impairment asset continues to be recognised through the unwinding of the discount. Impairment losses are recognised in profit or loss. When a subsequent event causes the amount of the impairment to decrease, the decrease in impairment loss is reversed through statement of comprehensive income. Trade and other receivables Trade and other receivables are recognised initially at invoice value, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The provision is recognised in the income statement as an operating charge. Alpha provides services to customers on credit terms with mainly arrears billing. Certain receivables may not be paid. The trade receivables impairment provision has been estimated in the context of the overall year-end trade receivables due, the trade receivables’ age profile and recent collection experience. The trade receivables’ balances recorded in the Group’s statement of financial position comprise a relatively small number of large balances. A full line-by-line review of trade receivables is carried out at the end of each month for possible impairments. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement. Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. As at 31 March 2019, the Group had no such financial liabilities. Trade and other payables Trade and other payables are initially recognised at fair value and are subsequently measured at amortised cost. Current and deferred income tax Taxation expense on the result for the period comprises current and deferred income tax. Income tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Annual Report 201999 The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Leases Rentals paid under operating leases are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease. Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the period of the lease. The Group does not currently hold any assets under finance leases. Non-financial assets The carrying amounts of the entity’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets’ recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value, less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates independent cash inflows (the “cash-generating unit”, “CGU”); that is, cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. For the purpose of goodwill impairment testing, if goodwill cannot be allocated to individual CGUs or groups of CGUs on a non-arbitrary basis, the impairment of goodwill is determined using the recoverable amount of the acquired entity in its entirety or, if it has been integrated, then the entire group of entities into which it has been integrated. Goodwill is tested annually for impairment in accordance with IFRS. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and, then, to reduce the carrying amounts of other assets in the unit (or group of units) on a pro-rata basis. An impairment loss is reversed if and only if the reasons for the impairment have ceased to apply. An impairment loss recognised for goodwill is not reversed. Impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Revenue recognition Revenue consists of the value of work executed for clients during the year, exclusive of VAT and rechargeable expenses. Consulting revenue is recognised as services are performed or delivered in accordance with the terms of the contract, which are primarily on a time and materials basis, although a small proportion of contracts are invoiced against agreed project milestones. Activity performance in excess of invoices raised is included within accrued income, up to the value of the relevant project delivery milestone, where applicable. Where amounts have been invoiced in excess of work performed, the excess is included within deferred income. Software licence fees and other revenue is recognised as support services are provided across the life of the licence. Revenue is wholly attributable to the principal activities of the Group. Annual Report 2019100 Notes to the consolidated financial statements continued 1. Basis of Preparation and Significant Accounting Policies continued Segmental reporting An operating segment is a component of the Group: (i) That engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); (ii) Whose operating results are regularly reviewed by the Board of Directors in order to make decisions about resources to be allocated to that component and assess its performance; and (iii) For which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, as required by IFRS 8 “Operating Segments”. The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the Board of Directors. The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole. Segment profit represents the profit earned by each segment without allocation of depreciation, amortisation, foreign exchange gains or losses, interest payable and tax. This is the measure of profit that is reported to the Board of Directors for the purpose of resource allocation and the assessment of segment performance. The Board regularly reviews consolidated operating results to make decisions about the financial and organisational resources of the Group and to assess overall performance. Employee benefits Defined contribution pension plan A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have a legal or constructive obligation to pay further amounts. Contributions to defined contribution schemes are charged to the statement of comprehensive income as they become payable in accordance with the rules of the scheme. Differences between contributions payable in the year and contributions paid are shown as either accruals or pre-payments in the statement of financial position. Share-based payments The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the statement of profit or loss. The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant. In determining the fair value of share-based payments under IFRS 2, management has considered a number of internal and external factors in order to judge the probability that management and employee share incentives may vest. Such judgements involve estimating a number of future performance and other factors. The fair value calculations have been externally assessed as reasonable in the circumstances. The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant. At the end of each reporting period the assumptions underlying the number of awards expected to vest are adjusted for the effects of non market-based vesting conditions to reflect the conditions prevailing at that date. The impact of any revisions to the original estimates is recognised in the statement of profit or loss, with a corresponding adjustment to equity. Fair value is measured by the use of a binomial model. The assumptions have been adjusted, based on management’s best estimate, for the effects of non-transferability, lack of dividend until vesting and exercise restrictions. Other benefits The Group operates a profit share bonus scheme that aims to pay employees a percentage of an individual’s salary, subject to country-level corporate performance in the period. The profit share is accrued in the financial year, based on management’s best estimates of overall financial performance and recognised as an employee benefit expense in the income statement. Short-term employee benefits including holiday pay are accrued as services are rendered. Annual Report 2019101 Earnings per share and adjusted earnings per share The Group presents basic and diluted earnings per share on an IFRS and adjusted basis. In calculating the weighted average number of shares outstanding during the period, any share restructuring is adjusted to allow comparability with other periods. The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, which arise from share options outstanding and shares held in treasury. A calculation is performed to determine the number of share options that are potentially dilutive based on the number of shares that could have been acquired at fair value, considering the monetary value of the subscription rights attached to outstanding share options. Adjusted earnings per share has been calculated after allowing for adjusting items explained in notes 5 and 6 to the financial statements. Alternative performance measures In order to provide better clarity to the underlying performance of the Group, Alpha uses alternative performance measures. The measures are not defined under IFRS and they may not be directly comparable with other companies’ adjusted measures. These non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, but have been included as the Directors consider them to be key measures used within the business for assessing the underlying performance of the Group’s ongoing business across periods. Dividends policy Dividends proposed by the Board are recognised in the financial statements when they have been approved by shareholders at the AGM. Interim dividends are recognised when they are paid. New accounting standards and interpretations There were no significant changes in accounting policies applied by the Group in these consolidated financial statements compared to those used in the most recent annual consolidated financial statements as at 31 March 2019, except for the adoption of new standards and interpretations described below. The International Accounting Standards Board (IASB) and IFRS Interpretations Committee (IFRIC) have issued the following standards and interpretations which are now effective: • • IFRS 9: Financial Instruments (effective for periods commencing on or after 1 January 2018) IFRS 15: Revenue from contracts with customers (effective for periods commencing on or after 1 January 2018) The Directors reviewed the nature and effect that these new standards have had on the Group and do not believe that the impact is material. These standards have been adopted by the Group: IFRS 9 Financial Instruments (effective for periods beginning on or after 1 January 2018) IFRS 9 changes the classification and measurement of financial assets, and the timing and extent of credit provisioning. The new categories per IFRS 9 have not had a material impact on the financial assets as trade receivables have continued to be carried at amortised cost. An expected credit loss model replaces the incurred loss model. This requires an assessment of the likelihood of default and any potential loss that may arise in the event of default. The Group has found that the new standard has not caused a material change in the impairment of trade receivables or any other financial assets because of the short-term nature of the trade receivables and the specific provisions currently being raised for them. IFRS 15 Revenue from contracts with customers (effective for periods beginning on or after 1 January 2018) IFRS 15 was published in 2014, replacing IAS 18 “Revenue”. This standard establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and, thus, has the ability to direct the use and obtain the benefits from the good or service. To determine revenue recognition for arrangements that are within the scope of IFRS 15, the standard identifies the following steps: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; (v) recognise revenue when (or as) the entity satisfies the performance obligation. Annual Report 2019102 Notes to the consolidated financial statements continued 1. Basis of Preparation and Significant Accounting Policies continued IFRS 15 Revenue from contracts with customers (effective for periods beginning on or after 1 January 2018) continued The adoption of the new standard resulted in a small timing difference of revenue recognition compared to the previous accounting standards. The cumulative effect of initially applying the new standard was recognised as an adjustment to the opening balance of retained earnings and accrued income. The cumulative effect of initially applying the new revenue standard amounted to less than 1% of revenue in the current period and the comparative period. The details of these adjustments have been summarised in note 3. The following standards and interpretations are not yet effective, but have been considered in the year: IFRS 16 Leases (effective for periods commencing on or after 1 January 2019) IFRS 16 was published in January 2016, replacing IAS 17 “Leases”. The Group will likely adopt IFRS 16 on a full retrospective basis and the Group will recognise the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings at 1 April 2018, i.e. the date of initial application, and apply IFRS 16 retrospectively for FY 19 to allow for better comparability. Results in the year ended 31 March 2020 will be IFRS 16 compliant and, consequently, the FY 20 Annual Report will be the first to include the full-year results on this basis. The standard requires lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less, or the underlying asset is of low value. The Group is still in the process of quantifying the implications of this standard. However, it expects the following indicative impacts at 1 April 2018: • The Group expects to recognise £2.4m of leased assets on transition, as leased assets that are currently accounted for off balance sheet, i.e. assets under leases classified as operating leases under IAS 17, will be recognised on the balance sheet and valued in accordance with the principles of IFRS 16. The biggest asset category affected for the Group is expected to be land and buildings, from the inclusion of office leases; • The Group is expected to recognise lease liabilities of £2.7m as existing operating leases are recognised, representing total cash commitments under operating leases discounted to present value; • Operating lease expenditure will be reclassified and split between depreciation and finance costs. Therefore, EBITDA is estimated to increase by £0.7m. Future depreciation and finance costs are also expected to increase as a result of increased assets and liabilities; • The Group estimates a small reduction in profit before tax as a result of the above changes of £0.04m, driven by an increase in finance costs as a result of new leases. These finance costs will have an accelerated profile that will reduce as the leases settle over the life; • There may be a corresponding effect on tax balances in relation to all of the above impacts. This standard will require key accounting judgements, in particular around the likelihood of lease renewals. 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, US and Europe & Asia. The Group’s operations all consist of one type of operation: consultancy and related services to the asset and wealth management industry. 31 March 2019 External revenue Cost of sales Gross profit UK £’000 44,937 (24,798) 20,139 US £’000 9,172 (7,514) 1,658 Europe & Asia £’000 21,851 (14,566) 7,285 Total £’000 75,960 (46,878) 29,082 Annual Report 201931 March 2018 External revenue Cost of sales Gross profit 103 UK £’000 40,020 (22,986) 17,034 US £’000 9,036 (6,353) 2,683 Europe & Asia £’000 16,953 (11,409) 5,544 Total £’000 66,009 (40,748) 25,261 During the year, the Group had one customer that comprised more than 10% of the Group’s revenues, reporting within the UK segment and comprising 10.6% of Group revenues. One customer contributed 10.7% of Group revenues in FY 18. 3. IFRS 15 New accounting standard, IFRS 15, was introduced this year and the Group has recognised the effect of applying IFRS 15 on a modified retrospective basis. This has resulted in an adjustment to opening retained earnings and additional deferred income of £0.3m, in the prior period. The restatement of profits resulting from the adoption of IFRS 15 has been minimal in both the current and comparative periods. 4. Operating profit Operating profit for the period is stated after charging/(crediting): Amortisation of intangible assets Depreciation of plant and equipment Net foreign exchange losses/(gains) Operating lease rentals Impairment provision recognised on trade receivables Defined contribution pension scheme costs Share-based payments charge Earn out & deferred consideration Costs directly attributable to AIM admission Acquisition costs Restructuring costs Auditor’s remuneration: Audit fees – parent company Audit fees – subsidiary companies Tax compliance services Tax advisory services Other assurance services FY 19 £’000 2,586 263 (116) 903 1 453 872 295 - - - FY 18 £’000 2,383 297 36 673 400 189 191 391 1,621 241 251 FY 19 £’000 FY 18 £’000 33 57 - - 10 25 57 14 54 24 Annual Report 2019104 Notes to the consolidated financial statements continued 5. Reconciliation of adjusted operating profit and adjusted EBITDA Operating profit Amortisation Loss on disposal of fixed assets Share-based payments charge Earn out & deferred consideration Acquisition costs Restructuring costs Costs directly attributable to AIM admission Total adjustments Adjusted operating profit (incl. FX) Foreign exchange (gains)/losses Adjusted operating profit Depreciation of plant and equipment Adjusted EBITDA Adjusted EBITDA (incl. FX) FY 19 £’000 12,572 2,586 6 872 295 – – – 3,759 16,331 (116) 16,215 263 16,478 16,594 FY 18 £’000 8,558 2,383 – 191 391 241 251 1,621 5,078 13,636 36 13,672 297 13,969 13,933 Alpha uses alternative performance measures, including adjusted EBITDA, to allow a clearer understanding of the underlying performance of the Group. Adjusted EBITDA is a commonly used measure in which earnings are stated before intangible asset amortisation and depreciation, used by the Board to assess performance. The Board considers that this alternative performance measure is the most appropriate measure by which users of the financial statements can assess the ongoing performance of the Group. Adjusted EBITDA also excludes the employee share-based payments charge to remove the inherent volatility in share- based payment expense calculations and more closely align to the operational activities. Note 21 sets out further details of the employee share-based payments expense calculation under IFRS 2. As per note 14, the acquisition of TrackTwo in the prior year involved deferred consideration payments in the form of an earnout, which, in accordance with IFRS 3, will be expensed annually to 2021 dependent on the ongoing employment of the vendor. This cost has been removed to calculate adjusted EBITDA as, whilst it will recur in the short term, it represents additional payments linked to the TrackTwo acquisition. Other acquisition costs expensed in the prior year, relating to the TrackTwo acquisition and to the acquisition of Alpha FMC Group Holdings Limited, have also been excluded from adjusted EBITDA as they are not directly attributable to the ongoing performance of the Group. Similarly, costs directly attributable to the AIM admission in October 2017 have also been excluded. Restructuring costs relating to realigning the US operations have been excluded from adjusted EBITDA as they relate to a specific restructuring programme. During the year, adjusted EBITDA excluding foreign exchange gains or losses was introduced as an alternative performance measure to better indicated the underlying operating performance of the Group. Adjusted EBITDA including foreign exchange gains or losses has also been presented for clarity. Annual Report 20196. Reconciliation to adjusted profit after tax Adjusted operating profit Tax charge Tax impact of adjusting items Adjusted profit after tax 105 FY 19 £’000 16,215 (3,321) (654) 12,240 FY 18 £’000 13,672 (1,941) (1,747) 9,984 Adjusted profit after tax is also shown to allow a clearer understanding of the underlying performance of the Group. Adjusted profit after tax is stated before adjusting items and their associated tax effects. 7. Staff costs The average number of employees employed by the Group, where “employees” includes Executive Directors but excludes contractors, was: UK US Europe & Asia Administration Staff costs for the above persons were: Wages and salaries Social security costs Pension costs Share incentive plans 8. Finance costs and finance income Bank interest receivable Interest payable on bank loans and overdraft Shareholder and management loan note interest Amortisation of issue costs on loan notes Total finance costs FY 19 Number FY 18 Number 145 49 110 32 336 FY 19 £’000 35,638 4,083 453 872 117 32 73 23 245 FY 18 £’000 28,841 3,629 189 191 41,046 32,850 FY 19 £’000 – (52) - - (52) FY 18 £’000 – (2,858) (2,479) (1,722) (7,059) Annual Report 2019106 9. Taxation Current tax In respect of the current year Adjustment in respect of prior periods Foreign taxation Deferred tax In respect of the current year Change in tax rate Adjustment in respect of prior periods Total tax expense for the year FY 19 £’000 2,433 (274) 1,397 (460) 13 212 FY 18 £’000 1,400 (29) 1,467 (908) - 11 3,321 1,941 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: Profit/(loss) before taxation Tax on profit on ordinary activities at standard UK corporation tax rate of 19% (2018: 19%) Effects of: Fixed asset differences Expenses not deductible for taxation Income not taxable for tax purposes Differences due to overseas tax rates Adjustments in respect of prior periods Adjustments in respect of prior periods – deferred tax Change in deferred tax rate Deferred tax not recognised Total tax expense for the year 10. Deferred tax At 1 April Arising on business combinations Charged to the statement of profit or loss Charged directly to other comprehensive income Charged directly to equity At 31 March FY 19 £’000 12,520 2,381 3 99 - 887 (274) 212 13 - FY 18 £’000 1,499 285 4 902 (81) 757 (29) 11 106 (14) 3,321 1,941 FY 19 £’000 3,401 - (235) - 27 FY 18 £’000 3,946 352 (897) - - 3,193 3,401 The UK Government has announced future tax changes to the corporation tax rate. These changes resulted in a rate of 19% for the 2018/19 and 2019/20 tax years and eventually culminate in a rate of 17% by 2020/21. As at 31 March 2019, all such changes have been substantively enacted and have therefore been reflected in the calculation of deferred tax for the year ended 31 March 2019. Annual Report 2019Movements in deferred tax during the year: Accelerated capital allowances Short-term timing differences Share options Arising on business combinations 11. Dividends Amounts recognised as distributions to equity holders: 107 1 April 2017 £’000 Recognised in income £’000 Amount arising on acquisition £’000 31 March 2019 £’000 20 - - 3,381 3,401 1 (194) (372) 330 (235) - - 27 - 27 FY 19 £’000 1,938 4,135 6,073 21 (194) (345) 3,711 3,193 FY 18 £’000 1,508 3,749 5,257 Interim dividend for the year ended 31 March 2019 of 1.91p (FY 18: 1.48p) per share Proposed final dividend for the year ended 31 March 2019 of 4.09p (FY 18: 3.69p) per share Total dividend for the year ended 31 March 2019 of 6.00p (FY 18: 5.17p) per share The proposed final dividend is subject to approval by the shareholders at the AGM and has not been included as a liability in these financial statements. 12. 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 normalised average number of ordinary shares 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 notes 5 and 6 have been made to the Group’s profit/(loss) for the financial period. The profits/(losses) and weighted average number of shares used in the calculations are set out below: Basic & diluted EPS Profit/(loss) for the financial year used in calculating basic and diluted EPS (£’000) Weighted average number of ordinary shares in issue Number of dilutive shares Weighted average number of ordinary shares, including potentially dilutive shares Basic EPS (p) Diluted EPS (p) Pro forma adjusted EPS Adjusted profit for the financial year used in calculating adjusted basic and diluted EPS (note 6) (£’000) Weighted average number of ordinary shares in issue Number of dilutive shares Year ended 31 March 2019 Period ended 31 March 2018 9,199 101,604 2,416 104,020 9.05 8.84 (442) 90,185 - 90,185 (0.49) (0.49) 12,240 101,604 2,416 9,984 101,860 - Weighted average number of ordinary shares, including potentially dilutive shares 104,020 101,860 Adjusted EPS (p) Adjusted diluted EPS (p) 12.05 11.77 9.80 9.80 Annual Report 2019108 Notes to the consolidated financial statements continued 12. Earnings per share and adjusted earnings per share continued Earnings or loss per share is calculated based on the share capital of the Company and the earnings of the Group. To aid comparability following the Group’s reconstruction and share reorganisation in the prior year, the number of ordinary shares immediately before AIM admission have been used to best indicate the share capital in existence at that time and provide basic and diluted earnings per share on a consistent basis. Similarly, in the adjusted EPS and adjusted diluted EPS calculations, the weighted average number of shares in the prior year considers the shares in issue at and since AIM admission. The prior period adjusted EPS and adjusted diluted EPS has been recalculated to exclude foreign exchange gains or losses. 13. Goodwill and Intangible fixed assets Goodwill Cost at beginning of the year Additions Gains/(losses) from foreign exchange Cost at end of the year/period 31 March 2019 £’000 31 March 2018 £’000 52,626 – 2,536 55,162 51,529 1,097 – 52,626 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 was recognised upon the acquisition of Alpha FMC Group Holdings Limited by Alpha Financial Markets Consulting plc on 3 February 2016 and is the difference between the consideration paid and the fair value of assets acquired and liabilities assumed. In the prior year, goodwill increased, reflecting the acquired goodwill arising on the acquisition of TrackTwo. Goodwill acquired and liabilities assumed represent the potential synergy benefits of combining the Alpha and TrackTwo intellectual property and talents of the team into the Group. 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 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 impairment reviews completed have calculated the recoverable amount of goodwill through a Value in Use calculation. The CGUs that have been considered are UK, US and Europe & Asia, in line with the Group’s operating segments and the goodwill allocated to the CGUs as follows: Goodwill by cash-generating unit UK USA Europe & Asia At end of the year/period 31 March 2019 £’000 31 March 2018 £’000 31,241 7,790 16,131 55,162 31,241 7,054 14,331 52,626 In considering this position, the estimated adjusted weighted average cost of capital (“WACC”) for the Group was determined to be 12.4% (FY 18: 11.6%). This discount rate has been applied to the Group’s future cash flow forecasts in order to make the assessment at each balance sheet date. As in the prior period, the base actuals have been inflated in line with 3-year plan, and by 1% then onwards, for each CGU, which management believes does not exceed the long-term average growth rate for the industry, with a terminal value calculated on a perpetuity basis. The recoverable amounts of all CGUs are based on the same key assumptions, including limited customer attrition, no significant change in the competitor landscape, no negative events impacting the Group’s brand or reputation, and no legal or regulatory changes impacting the Group’s offering. Annual Report 2019109 These cash flows are discounted at a post-tax discount rate of 12.4% and adjusted for specific risk factors that take into account the sensitivities of the projection. The Group has conducted a sensitivity analysis on the impairment test for all CGUs individually. If the assumed growth rate was reduced to 0%, the receivable amount for each CGU would remain greater than their carrying values. Further increasing the post-tax discount rate to 13.5% resulted in positive headroom remaining for all CGUs compared to the carrying value of goodwill. The Directors do not therefore believe there to be any impairment indicators. The Directors have identified that, following the Group’s transition to IFRS in the period ended 31 March 2018, the requirement under IAS21.47 to treat goodwill allocated to foreign operations as if it were an asset of the foreign operations to which it relates, and to retranslate the balance at the year end, had not been applied. At 31 March 2019, goodwill has been appropriately retranslated with the cumulative impact on the financial statements being an increase in goodwill and foreign exchange reserves of £2.5m. Of this amount, a gain of £2.7m relates to the period ended 31 March 2017, a loss of £0.4m relates to the year ended 31 March 2018. and a gain of £0.2m to the year ended 31 March 2019. There is no impact in either the current or prior year on reported or adjusted profits and earnings per share. The Directors believe the key metrics of relevance to users are underlying profits for the year and earnings per share. As this change has no impact on the statement of profit or loss, the statement of cash flows or earnings per share of the current or earlier periods; and as the net prior period impact is not material in the context of the overall carrying amount of goodwill or net assets (an increase of less than 3%), the Directors have judged it appropriate to recognise the amount relating to prior periods in other comprehensive income in the year ended 31 March 2019. Intangible fixed assets As at 31 March 2019 Cost At the start of the year Additions At the end of the year – total Amortisation At the start of the year Charge for the year At the end of the year Net book value As at 31 March 2018 Cost At the start of the year Recognised on acquisitions (see note 14) At the end of the year Amortisation At the start of the year Charge for the year At the end of the year Net book value Customer relationships £’000 Intellectual property £’000 20,068 - 20,068 (3,442) (1,792) (5,234) 14,834 2,086 - 2,086 (499) (260) (759) 1,327 Trade name £’000 5,630 - 5,630 (930) (484) (1,414) 4,216 Customer relationships £’000 Intellectual property £’000 18,650 1,418 20,068 (1,813) (1,629) (3,442) 16,626 1,421 665 2,086 (237) (262) (499) Capitalised development costs £’000 - 441 441 - (50) (50) 391 Trade name £’000 5,630 – 5,630 (438) (492) (930) Total £’000 27,784 441 28,225 (4,871) (2,586) (7,457) 20,768 Total £’000 25,701 2,083 27,784 (2,488) (2,383) (4,871) 1,587 4,700 22,913 Annual Report 2019110 Notes to the consolidated financial statements continued 13. Goodwill and Intangible fixed assets continued Customer relationships Customer relationships primarily 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. 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, discount factors and contributory asset charges used. There were no additions in the current period. Additions in the prior period represent the fair value of the customer relationships acquired from Track Two GmbH. Please see note 14. A useful economic life of 11−12 years has been deemed appropriate based on the average realisation rate of cumulative cash flows and benchmarked data. Projected cash flows have been discounted over this period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income. There are 8.8 years and 9.3 years remaining to be amortised for the customer relationships in relation to Alpha FMC Group Holdings Limited and TrackTwo respectively. Intellectual property Intellectual property represents the fair value at the 3 February 2016 acquisition date of the intellectual property that was owned by, but not previously recognised as assets of, Alpha FMC Group Holdings Limited. 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 and projected cash flows have been discounted over this period. There were no additions in the current period. Additions in the prior period represent the fair value of the intellectual property acquired from Track Two GmbH. Please see note 14. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income. There are 3.8 years and 5.3 years remaining to be amortised for the intellectual property in relation to Alpha FMC Group Holdings Limited and TrackTwo respectively. Trade name Trade name represents 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. 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 15 years has been deemed appropriate based on benchmarking reviews and projected cash flows have been discounted over this period. There were no additions in the current period. The amortisation charge is recognised in administrative expenses within the statement of comprehensive income. There are 11.8 years remaining to be amortised for the trade name in relation to Alpha FMC Group Holdings Limited. Capitalised development costs Capitalised development costs represents the costs incurred in the development enhancements to the 360 SalesVista software in 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 2.9 years remaining to be amortised for the capitalised development costs in relation to the development of new software. Annual Report 2019111 14. Acquisition and disposal of business Acquisitions in the prior year On 18 July 2017, the Group acquired 100% of the share capital and voting interest of TrackTwo GmbH for an upfront cash consideration of €2,331,610, deferred consideration €1,166,200 paid in January 2019 and 695 consideration shares in the Company with a fair value of £1 per share. This acquisition has 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 table below sets 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 subsidiary at the date of acquisition. TrackTwo net assets at the acquisition date: Tangible fixed assets Customer relationships Intellectual property Trade and other debtors Cash Trade and other creditors Deferred tax liability Net identifiable assets and liabilities acquired Cash consideration relating to business combination Goodwill on acquisition (see note 13) Book values £’000 Fair value adjustments £’000 Values on acquisition £’000 9 – – 316 108 (195) – 238 – 1,418 665 – – – (352) 1,731 9 1,418 665 316 108 (195) (352) 1,969 3,066 1,097 In addition, as part of the purchase negotiations, the Company has put in place an annual 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. The earn-out and final ownership consideration payments have been estimated by the Directors based on anticipated future earnings and discounted to current values. An expense of £295,000 (FY 18: £391,000) has been recognised for the current year and presented as an adjusted expense (see note 5). This consists of £nil (FY 18: £38,000) payable within one year, £234,000 (FY 18: £277,000) to be settled after one year and £61,000 (FY 18: £76,000) to be settled in equity. Given this expense includes estimation, were assumptions adjusted for performance to be 10% better than anticipated, the earn-out expense for the year would increase by £15,000; or were performance 10% worse than anticipated, the earn-out expense for the year would decrease by £17,000. Annual Report 2019112 Notes to the consolidated financial statements continued 15. Tangible fixed assets Leasehold improvements £’000 Fixtures, fittings and equipment £’000 Computer equipment £’000 208 - - - 208 - - (2) 206 (115) - (37) - (152) - (35) - (187) 19 56 192 7 57 - 256 - 59 - 315 (178) (2) (43) - (223) - (30) - (253) 62 33 Cost At 1 April 2017 Acquired through business combinations Additions Disposals At 31 March 2018 Acquired through business combinations Additions Disposals At 31 March 2019 Depreciation At 1 April 2017 Acquired through business combinations Charge for the period Disposals At 31 March 2018 Acquired through business combinations Charge for the period Disposals At 31 March 2019 Net book value at 31 March 2019 Net book value at 31 March 2018 There are no assets held on finance leases. 16. Trade and other receivables Amounts due within one year: Trade receivables Less: provision for impairment Trade receivables – net Other debtors Prepayments Accrued income Total amounts due within one year: Total £’000 1,170 14 254 (20) 1,418 - 323 (57) 770 7 197 (20) 954 - 264 (55) 1,163 1,684 (426) (3) (221) 4 (646) - (198) 14 (830) 333 308 (719) (5) (301) 4 (1,021) - (263) 14 (1,270) 414 397 FY 19 £’000 FY 18 £’000 17,086 (447) 16,639 589 912 1,540 19,680 18,297 (446) 17,851 55 593 2,743 21,242 Trade receivables are non-interest bearing and generally have a 30- to 90-day term. Due to their short maturities, the carrying amount of trade and other receivables is a reasonable approximation of their fair value. Annual Report 2019113 A provision for impairment of trade receivables is established when there is objective evidence that the Group is likely to be unable to collect all amounts due according to the original terms. The Group considers factors such as customer correspondence, default or delinquency in payment, significant financial difficulties of the receivable and the probability that the debtor will enter bankruptcy in deciding whether the trade receivable is impaired. At 1 April Charge for the period Uncollected amounts written off, net of recoveries As at 31 March At the year end the following trade receivables were overdue but not impaired: Not yet due Between 1 and 3 months Over 3 months As at 31 March 17. Cash and cash equivalents Cash in bank and at hand Cash and cash equivalents 18. Trade and other payables Trade payables Accruals Deferred income Taxation and social security Corporation tax Other creditors Earn out provision (note 14) Total amounts owed within one year: FY 19 £’000 446 1 - 447 FY 19 £’000 8,227 6,773 2,086 17,086 FY 19 £’000 18,581 18,581 FY 19 £’000 1,437 12,744 662 2,000 3,359 1,584 - FY 18 £’000 46 400 - 446 FY 18 £’000 14,873 1,343 2,081 18,297 FY 18 £’000 9,774 9,774 Restated FY 18 £’000 2,361 10,734 989 2,428 1,826 2,245 38 21,786 20,621 Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 30 days (FY 18: 30 days). The Directors consider that the carrying amount of trade and other payables is a reasonable approximation of their fair value. Deferred income in the prior period has been restated in line with the introduction of new accounting standard, IFRS 15, resulting in an increase of £0.3m against the previously reported figure. Annual Report 2019114 Notes to the consolidated financial statements continued 19. Non-current liabilities Deferred tax provision (note10) Other non-current liabilities 31 March 2019 £’000 31 March 2018 £’000 3,193 486 3,679 3,401 277 3,678 £486,000 (FY 18: £277,000) of costs associated with the earn-out payments linked to the acquisition of TrackTwo (see note 14) are included within other non-current liabilities. 20. Called up share capital Alloted, called up and fully paid Ordinary £0.00075 shares (1 vote per share) Alloted, called up and fully paid Ordinary £0.00075 shares (1 vote per share) Movements in share capital during the year ended 31 March 2019: Balance at 1 April 2018 102,234,583 ordinary shares of £0.00075 each Cancelled shares Balance at 31 March 2019 101,974,874 ordinary shares of £0.00075 each FY 19 Number Restated FY 18 Number2 101,974,874 102,234,583 101,974,874 102,234,583 FY 19 £ 76,481 76,481 Restated FY 182 £ 76,676 76,676 Note £ (i) 76,676 (195) 76,481 (i) During the year, 259,709 shares have been cancelled. At 31 March 2019, the total number of shares in issue was 101,974,874. Alpha Employee Benefit Trust The Group held 476,206 (FY 18: 375,000) shares in an employee benefit trust (“EBT”) to satisfy share options granted under its joint share ownership plan (“JSOP”). Treasury shares The Group held 387,740 (FY 18: nil) shares in treasury from prior employees for nominal value. 2 The prior year number of shares in issue has been restated to include shares held in treasury and the Alpha Employee Benefit Trust. Annual Report 2019115 21. Share-based payments The Management Incentive Plan (“MIP”) The Group has an MIP to retain and incentivise the Executive Directors and selected key employees. 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 Executive Directors of the Company are subject to the fulfilment of performance conditions including (a) the Group to achieve its initial AIM market consensus estimate for adjusted EPS for the financial year ended 31 March 2019, (b) the Group to achieve a total shareholder return for the 3 years from admission to AIM in excess of the average total shareholder return of a peer group of comparable companies, and (c) the Group to achieve between 10 or 15% EPS growth for the financial year ended 31 March 2019. Assuming conditions (a) and (b) are met, if EPS for the financial year ended 31 March 2019 exceeds the EPS for the year ended 31 March 2018 by 15%, 100% of the share options or share awards will vest; if EPS for the financial year ended 31 March 2019 exceeds the EPS for the year ended 31 March 2018 by 10%, 66% will vest. There will be a straight line of vesting if EPS for the year ended 31 March 2019 exceeds the EPS for the year ended 31 March 2018 by between 10% and 15%. Options granted to selected senior management will be subject to Group EPS, local budget performance conditions and such conditions determined by the Remuneration Committee as being appropriate to their personal role and objectives. MIP awards have either nil exercise price payable (or there shall be 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 2019 a total of 407,258 share option and award grants had been made to employees during the year (FY 18: 2,977,775). Details of the share option awards made are as follows: Outstanding at the beginning of the year Granted during the year Exercised during the year Forfeited during the year Expired during the year Outstanding at the year end Exercisable at the year end No share options were exercisable in the year. FY 19 Number of share options 2,977,775 407,258 – (186,747) – 3,198,286 – Weighted average exercise price – – – – – – – The options outstanding at 31 March 2019 had a weighted average remaining contractual life of 4 years and a nil or nominal exercise price. During the year ended 31 March 2019, options were granted on 26 July 2018, 6 December 2018 and 23 January 2019 to employees and certain senior management. The weighted average of the estimated fair values of the options outstanding is £0.78 per share. No options were granted in previous years. Annual Report 2019116 Notes to the consolidated financial statements continued 21. Share based payments continued The value of the options has been measured by the use of 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: Weighted average share price at grant date Exercise price Volatility Weighted average vesting period Risk free rate Expected dividend yield FY 19 2.51 – 30% 4 0.79% 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 options outstanding that have time vesting criteria only were valued using a Black-Scholes model using the same inputs as above. The Group recognised a total expense of £872,000 related to equity settled share-based payment transactions in the current year, including relevant social security taxes (FY 18: £191,000). 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 £365,000. 22. Operating lease commitments As at 31 March 2019, the Group has lease agreements in respect of properties and equipment for which the payments extend over a number of years. The future minimum lease payments under non-cancellable leases are as follows: Due: Within one year Within two to five years After five years FY 19 £’000 455 1,411 210 2,076 FY 18 £’000 452 1,621 751 2,824 For the year ending 31 March 2020, the Group will adopt the new accounting standard for leases, IFRS 16. Under this standard, the commitments under operating leases reflected in the table above will be recognised on the consolidated statement of financial position as lease liabilities discounted to present value. Please see note 1 for further details. Annual Report 201923. Financial instruments Carrying amount of financial instruments The carrying amounts of the financial assets and liabilities include: Assets measured at amortised cost Liabilities measured at amortised cost 117 FY 19 £’000 36,760 (17,765) FY 18 £’000 27,625 (3,326) The book value of the financial instruments is deemed to be approximate to fair value. The Group’s financial instruments comprise cash and cash equivalents, items such as trade payables and trade receivables that arise directly from its operations and, in prior years, bank borrowings. These financial instruments arise in the ordinary course of business and their main purpose is to provide finance for the Group’s operations. The Group’s operations expose it to a variety of financial risks including credit risk, liquidity risk, interest rate risk, and foreign currency exchange rate risk. The Board has overall responsibility for internal control and risk management by the Group. In this structure, the Audit Committee manages the processes of reviewing the quality of internal controls that are related to the financial performance of the Group, as delegated by the Board. The policies set by the Board of Directors are implemented by the Company’s finance team. Credit risk The Group’s credit risk is primarily attributable to its trade receivables. The Group has policies that require appropriate credit checks on potential customers before sales are made. Interest rate risk The Group has interest-bearing assets and previously interest-bearing liabilities. Interest-bearing assets comprise only cash and cash equivalents that earn interest at a variable rate. The Group historically had a policy of maintaining debt at fixed rates to ensure the certainty of future interest cash flows and will reconsider were the Group to re-incur indebtedness. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature. The Group has no derivative transactions outstanding at 31 March 2019. As at 31 March 2019, given the low levels of interest earned on these balances, if LIBOR had increased or decreased by 0.5%, the effect on post-tax profit and equity would have been minimal. The Group’s cash and cash equivalents earned interest at a variable rate during the year. Liquidity risk The Group maintains a committed revolving credit facility (“RCF”) alongside its cash balances, designed to ensure it has sufficient available funds for operations and planned expansions. The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due. Foreign currency exchange rate risk The Group is exposed to foreign currency exchange rate risk mainly as a result of trade receivables and payables that will be settled in euros and US dollars. During the year, the Group did not enter into any arrangements to hedge this risk, as the Directors did not consider the exposure to be significant given the short-term nature of the balances. The Group will review this policy as appropriate in the future. Receivables Cash Payables Total GBP ’000 9,693 10,164 (961) 18,896 Euro ’000 4,556 4,415 (252) 8,719 USD ’000 2,425 2,588 (237) 4,776 CHF ’000 696 303 (38) 961 SGD ’000 1,110 2,068 (77) 3,101 HKD ’000 89 28 (45) 72 Annual Report 2019118 Notes to the consolidated financial statements continued 24. Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, in order to provide returns for shareholders and maintain an optimal capital structure to reduce the cost of capital. The Group defines capital as being share capital plus all reserves, which amounted to £89,140,000 as at 31 March 2019 (FY 18: £82,972,000). The Board of Directors monitors the level of capital as compared to the Group’s long-term debt commitments and adjusts the ratio of debt to capital as is determined to be necessary, by issuing new shares, reducing or increasing debt, paying dividends and returning capital to shareholders. The Group is not subject to any externally imposed capital requirements. 25. Related party disclosures Details of Directors’ remuneration have been presented in the Remuneration Committee report on p 66. There were no other transactions with Directors, or entities in which a Director is also a Director or partner, or shareholders in the year ended 31 March 2019 (FY 18: £23,000). 26. Ultimate controlling party As at 31 March 2019, there is no ultimate controlling party. Annual Report 2019Company statement of financial position As at 31 March 2019 Assets Non–current assets Investments Total non–current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Current liabilities Trade and other payables Total current liabilities Net current assets Non-current liabilities Borrowings Deferred tax provision Other non-current liabilities Total non-current liabilities Net assets/(liabilities) Equity Issued share capital Share premium Capital redemption reserve Other reserves Retained earnings Total shareholders’ equity 119 Year ended 31 March 2019 £’000 Year ended 31 March 2018 £’000 Note 2 3 4 1,344 1,344 1,344 1,344 110,329 92,523 - - 110,329 92,523 (8,534) (8,534) 101,795 (5,167) (5,167) 87,356 - (27) - (27) - - - - 103,112 88,700 76 77 89,396 89,396 1 600 13,039 103,112 - 191 (964) 88,700 As permitted by section 408 of the Companies Act 2006, a separate statement of comprehensive income of the parent company has not been presented. The parent company’s profit for the year was £19,690,000. The notes on pp 122-125 form part of these financial statements. These financial statements were approved and authorised for issue by the Board of Directors on 5 June 2019. They were signed on its behalf by: Euan NB Fraser Global Chief Executive Officer John C Paton Chief Financial Officer Annual Report 2019 120 Company statement of cash flows For the year ended 31 March 2019 Cash flows from operating activities: Operating profit/(loss) for the year Costs relating to AIM admission Acquisition related costs Share-based payment charge Operating cashflows before movements in working capital Working capital adjustments: (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Tax paid Net cash generated from operating activities Cash flows from investing activities: Acquisition of subsidiary Amounts owed to Group undertakings Net cash used in investing activities Cash flows from financing activities: Issue of ordinary share capital Interest paid Dividends received Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of the period Year ended 31 March 2019 £’000 Year ended 31 March 2018 £’000 (860) - - 430 (430) (6,130) 6,560 - – - - – - - - - – – – – – (2,178) 1,621 78 191 (288) (10,927) 11,218 (3) – - - – - - - - – – – – – Annual Report 2019121 Company statement of changes in equity For the year ended 31 March 2019 As at 1 April 2017 Comprehensive income Profit for the period Foreign exchange differences on translation of foreign operations Transactions with owners Shares issued (equity) Share-based payment reserves Consideration to be settled in equity Dividends As at 31 March 2018 As at 1 April 2018 Comprehensive income Profit for the period Foreign exchange differences on translation of foreign operations Transactions with owners Shares cancelled (equity) Share-based payment reserves Consideration to be settled in equity Dividends As at 31 March 2019 Share Capital £’000 – – – 77 – – – 77 77 – – (1) – – – 76 Share premium £’000 86 – – 89,310 – – – 89,396 89,396 – – – – – – 89,396 Capital redemption reserve £’000 Other reserves £’000 – – – – – – – – – – – 1 – – – 1 – – – – 191 – – 191 191 – – – 409 – – 600 Retained earnings £’000 (1,266) Total £’000 (1,180) 1,810 1,810 – – – – (1,508) (964) – 89,387 191 – (1,508) 88,700 (964) 88,700 19,690 19,690 – – – – – – 409 – (5,687) 13,039 (5,687) 103,112 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. 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 Company statement of comprehensive income. Annual Report 2019122 Notes to the Company financial statements 1. Summary of significant accounting policies General information Alpha Financial Markets Consulting plc (the “Company”) is a public company incorporated, domiciled and registered in England, in the UK. The registered number is 09965927 and the registered address is 60 Gresham Street, London, EC2V 7BB. The parent company financial statements present information about the Company as a separate entity and not about its group. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and interpretations issued by the IFRS Interpretations Committee. The Company financial statements are prepared on the historical cost basis. Non-current assets and disposal groups held for sale are stated at the lower of previous carrying amount and fair value less costs to sell. The presentational currency of these financial statements and the functional currency of the Company is pounds sterling. All amounts in these financial statements have been rounded to the nearest £1,000. Going concern The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company have adequate resources to continue in operation for the foreseeable future. The Company’s forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Company has sufficient financial resources, together with assets that are expected to generate cash flow in the normal course of business. Accordingly, the Directors have adopted the going concern basis in preparing these Company financial statements. Principal accounting policies The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Company financial statements. In the opinion of the Directors, the only judgement or estimate that has a significant impact in the year ended 31 March 2019 is noted below: Share-based payments Management have estimated the share-based payments expense under IFRS 2. In determining the fair value of share-based payments, management have considered a number of internal and external factors in judging the probability that management and employee share incentives may vest. Such judgements involve estimating a number of future performance and other factors. The fair value calculations have been externally assessed for reasonableness in the current and prior period. Changes in accounting policy In these financial statements the Group has changed its accounting policies in the following areas: Adoption of IFRS 9 and IFRS 15 The Company has adopted the following IFRSs in these financial statements: • • IFRS 9 Financial Instruments; and IFRS 15 Revenue from Contract with Customers. There have been no adjustments with respect of these adoptions. Annual Report 2019123 Financial instruments (i) Recognition and initial measurement Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. (ii) Classification and subsequent measurement Financial assets Classification On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (“FVOCI”) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions: • • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Investments in subsidiaries are carried at cost less impairment. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement. Financial liabilities and equity Financial liabilities are classified as measured at amortised cost. 2. Fixed asset investment Cost At 1 April 2017 Additions Disposals At 31 March 2018 Additions Disposals At 31 March 2019 £’000 1,338 6 – 1,344 – – 1,344 The Company’s fixed asset investments are all in relation to investments in subsidiaries. The Company holds no tangible fixed assets. Annual Report 2019124 Notes to the Company financial statements 2. Fixed asset investment continued The undertakings in which the Group’s and Company’s interest at the period end is more than 20% are as follows: Subsidiary undertakings Alpha FMC Trustees Limited Alpha FMC Midco Limited Alpha FMC Midco 2 Limited Alpha FMC Bidco Limited Alpha FMC Group Holdings Limited Alpha FMC Group Nominees Limited Alpha FMC Group Limited Alpha Financial Markets Consulting Group Limited Alpha Financial Markets Consulting (UK) Limited Alpha Technology Services Consulting Limited Glass Client Programs Limited Alpha Data Solutions Limited Alpha Financial Markets Consulting Inc. Alpha Financial Markets Consulting S.A.S. Alpha Financial Markets Consulting S.A. Alpha Financial Markets Consulting Netherlands B.V. Alpha Financial Markets Consulting Switzerland S.A. Track Two GmbH Alpha Financial Markets Consulting Singapore Pte. Limited Alpha Financial Markets Consulting Hong Kong Limited Alpha Financial Markets Consulting Australia PTY Limited Country of incorporation Registered address Principal activity Class and percentage of shares held 31 March 2019 Class and percentage of shares held 31 March 2018 UK UK UK UK UK UK UK UK UK UK UK UK USA France Luxembourg Netherlands Switzerland Germany Singapore Hong Kong 1 1 1 1 1 1 1 1 1 1 1 1 2 3 4 5 6 7 8 9 Dormant 100% ordinary 100% ordinary Intermediate holding company 100% ordinary 100% ordinary Intermediate holding company 100% ordinary 100% ordinary Intermediate holding company 100% ordinary 100% ordinary Intermediate holding company 100% ordinary 100% ordinary Group services 100% ordinary 100% ordinary Intermediate holding company 100% ordinary 100% ordinary Intermediate holding company 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Dormant 100% ordinary 100% ordinary Dissolved n/a 100% ordinary Consultancy services 100% ordinary n/a Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Consultancy services 100% ordinary 100% ordinary Australia 10 Consultancy services 100% ordinary n/a 60 Gresham Street, London, EC2V 7BB 575 Fifth Avenue, New York, NY 10017, USA 6 Square de L’Opera Louis Jouvet, 75008 Paris, France 19/21 route d’Arlon – bloc B, L-8009 Strassen, Luxembourg 1 2 3 4 5 Spaces Zuidas, Barbara Strozzilaan 101, 1083 HN, Amsterdam, The Netherlands 6 Bleicherweg 10, 8002 Zürich, Switzerland 7 Mergenthalerallee 73-75, 65760 Eschborn, Germany 8 9 10 383-385 George Street, Sydney NSW 2000 3A Conway Circle, Singapore 558288 Level 8 Admiralty CTR Tower II, 18 Harcourt Road, Admiralty, Hong Kong Annual Report 2019Subsidiary undertakings Alpha FMC Trustees Limited Alpha FMC Midco Limited Alpha FMC Midco 2 Limited Alpha FMC Bidco Limited Alpha FMC Group Holdings Limited Alpha FMC Group Nominees Limited Alpha FMC Group Limited Alpha Financial Markets Consulting Group Limited Alpha Financial Markets Consulting (UK) Limited Alpha Technology Services Consulting Limited Glass Client Programs Limited Alpha Data Solutions Limited Alpha Financial Markets Consulting Inc. Alpha Financial Markets Consulting S.A.S. Alpha Financial Markets Consulting S.A. Alpha Financial Markets Consulting Netherlands B.V. Alpha Financial Markets Consulting Switzerland S.A. Track Two GmbH Alpha Financial Markets Consulting Singapore Pte. Limited Alpha Financial Markets Consulting Hong Kong Limited Alpha Financial Markets Consulting Australia PTY Limited 3. Trade and other receivables Amounts due within one year: Trade receivables Less: provision for impairment Trade receivables – net Amounts owed by Group undertakings Other debtors Total amounts due within one year 4. Trade and other payables Amounts owed to Group undertakings Corporation tax Other creditors Accruals and deferred income Total amounts owed within one year 125 Share Capital & Reserves £’000 Profit/(loss) for the period £’000 – (88) 20 2,923 29,425 – 2 9,165 17,136 – – – (1,532) 6,461 1,053 (327) (9) (347) 838 (7) – – 20,909 20,909 24,206 24,568 – 24,568 17,945 10,992 – – – (635) 1,982 342 (75) (60) (774) 542 (9) - FY 19 £’000 FY 18 £’000 – – – – – – 110,326 92,520 3 3 110,329 92,523 FY 19 £’000 7,534 1 563 436 FY 18 £’000 4,437 1 729 – 8,534 5,167 Annual Report 2019126 Notes Annual Report 2019127 Notes Annual Report 2019128 The power of our people Annual Report 2019Introduction Annual Report 2019 Welcome to Alpha’s 2019 Annual Report & Accounts Alpha is a leading global consultancy to the asset and wealth management industry. Perspective | Strategy | Technical Expertise | Data Solutions Headquarter in the UK, and quoted on the AIM of the London Stock Exchange, Alpha Financial Markets Consulting1 is a leading global provider of specialist consultancy services to the asset and wealth management industry. Alpha has worked with 80% of the world’s top 20 asset managers by AUM, along with a wide range of other buy-side firms. It has the largest dedicated team in the industry, with over 360 consultants globally, operating from 10 offices spanning the UK, Europe, the US and Asia. For more information, see the website: investors.alphafmc.com Contents Introduction Welcome 1 Highlights 2 Chairman’s Report 5 Global Chief Executive Officer’s Report Strategic Report 12 At a Glance 16 Market Overview 20 Business Model 24 Strategy 26 Key Performance Indicators 28 Risk Management Corporate Social Responsibility 38 Employee Framework 42 Case Studies 44 Our Communities Corporate Governance 50 Corporate Governance Code 52 Governance Framework 60 Board of Directors 62 Meet the Director 64 Audit Committee 66 Remuneration Committee 72 Nomination Committee 74 Directors’ Report 78 Independent Auditor’s Report Financial Statements 86 Chief Financial Officer’s Report 90 Consolidated statement of comprehensive income 91 Consolidated statement of financial position 92 Consolidated statement of cash flows 93 Consolidated statement of changes in equity 94 Notes to the consolidated financial statements 119 Company statement of financial position 120 Company statement of cash flows 121 Company statement of changes in equity 122 Notes to the Company financial statements Company Information IBC Directors and Advisers 1 Alpha Financial Markets Consulting plc: “Alpha”, the “Company”, the “Group” Company Information Directors and Advisers Nominated Adviser Grant Thornton 30 Finsbury Square London EC2A 1AG Broker Joh. Berenberg, Gossler & Co. 60 Threadneedle Street London EC2R 8HP Company Secretary company.secretary@alphafmc.com Corporate and Investors’ Website investors.alphafmc.com Client Website alphafmc.com Directors ENB Fraser JC Paton K Fry PR Judd NR Kent Company Number 09965297 Registered Office Alpha Financial Markets Consulting plc 60 Gresham Street London EC2V 7BB Auditor KPMG LLP St Nicholas House Park Row Nottingham NG1 6FQ Registrar Computershare The Pavilions Bridgwater Road Bristol BS99 6ZZ Design: Graphical www.graphicalagency.com Photography Inside back cover, pp 15 (left), 17, 22, 25, 26, 27, 29, 36−37, 41, 58 (top, bottom), 66, 67, 71, 73, 83, 89 by davebrownphoto.com pp 2, 5, 48−49, 60, 63, 86 by Alastair Lever pp 4, 6, 23, 35, 58 (middle), 84−85 by www.seanthephotographer.com pp 9, 10−11, 15 (right), 34, 69 by www.letsmakeit.fr pp 13, 19, 33, 57, 77, 128 by Andrew Elko A l p h a F n a n c a l i i Annual Report & Accounts 2019 Alpha FMC 60 Gresham Street London EC2V 7BB +44 (0) 207 796 9300 enquiries@alphafmc.com M a r k e t s C o n s u l t i n g A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 9 alphafmc.com The power of our people 

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