- Headcount up by 70 per cent
- Strong presence in North America
Alpha Financial Markets Consulting (AFM) is having a growth spurt. The company, which advises asset managers, wealth managers and insurers, has massively expanded its client base and has seen sales and profits surge.
Organic net fee income at Alpha FMC grew by over 30 per cent in 2022, driven by a particularly strong performance in North America. Chief executive Euan Fraser said asset managers are increasingly facing fee pressures and have sought help from consultants to help protect their operating margins, be it through technology, outsourcing or other efficiency measures.
Growth has been bolstered by the acquisition of Lionpoint, a boutique consultancy that provides services to the alternative investment industry. In total, client numbers have shot up from 439 to 718, and Alpha FMC said it has now worked with all of the world's top 20 and 76 per cent of the world's top 50 asset managers.
Much of the group’s focus is now on North America, where revenue almost tripled in 2022 to £46.9mn – 30 per cent of total turnover. While gross profit margins are lower in the US and than in the UK – 33 per cent compared with 42 per cent – management is confident that they will widen as operations mature.
The big issue for professional services firms like Alpha FMC is retaining talented staff. The group said its attrition rate has risen since Covid-19 but remains “well below” the average among its peers. Indeed, it doesn’t seem to be having any problems increasing its headcount: the number of consultants reached 760 by the year end, compared with 448 in 2021. Of this 312-person increase, Lionpoint added 123 to the group when it was acquired and has since added a further 75.
The need to attract candidates is driving up costs, however. Adjusted administrative expenses almost doubled to £25.5mn, and the ratio of adjusted administrative expenses to net fees rose from 13.4 per cent to 16.1 per cent. This was due to more money being spent on recruitment, as well as client entertainment and travel.
As such, the group’s adjusted Ebitda margin narrowed slightly to 21.5 per cent from 22.2 per cent in 2021.
This did little to dampen the group’s stellar growth, however, or to damage its balance sheet. As of 31 March, it had £63.5mn of cash and no debt, suggesting it is well placed for future expansion. Buy.
|ALPHA FINANCIAL MARKETS CONSULTING (AFM)|
|ORD PRICE:||360p||MARKET VALUE:||£405m|
|TOUCH:||350-370p||12-MONTH HIGH:||496p||LOW: 290p|
|DIVIDEND YIELD:||2.9%||PE RATIO:||47|
|NET ASSET VALUE:||118p*||NET CASH:||£61.1mn|
|Year to 31 Mar||Turnover (£mn)||Pre-tax profit (£mn)||Earnings per share (p)||Dividend per share (p)|
|*Includes intangible assets of £132mn, or 117p a share|