Join our community of smart investors

Alpha FMC welcomes consolidation

The asset management consultancy does not fear the steady pace of tie-ups within its client base
November 20, 2019

Is Alpha Financial Markets’ (AFM) client pool shrinking? Half-year results for the asset management consultancy landed shortly after news that Russell Investments is up for sale. Recent times have seen mergers between Standard Life and Aberdeen AM, Janus Capital and Henderson Global Investors, and Invesco and OppenheimerFunds. This year, smaller deals in the City – such as the Premier-Miton and Liontrust-Neptune tie-ups – suggest the consolidation story remains intact.

IC TIP: Buy at 196p

One might imagine fewer asset managers means fewer clients and greater fee pressures. Not so, argues Alpha FMC chief executive Euan Fraser, who told us deals are often “fabulous news”, as they lead to multi-year engagements and fresh opportunities to advise. In the six months to September, these new opportunities were most heavily concentrated in North America, where gross margins improved and revenues jumped 39 per cent to £6.9m.

The group’s own consolidation efforts are reportedly going well. Axxsys, the technology-focused peer firm acquired in the summer (thereby denting statutory profits), is now integrated. While the post-period purchase of software provider Obsidian – “an absolute gem of a business” in the words of Mr Fraser –  should complement Alpha’s suite of products.

Analysts at Berenberg expect adjusted earnings per share of 14p for the year to March 2020, and 15.6p in FY2021.

ALPHA FINANCIAL MARKETS (AFM)  
ORD PRICE:196pMARKET VALUE:£197.94m
TOUCH:192-200p12-MONTH HIGH:260pLOW: 188p
DIVIDEND YIELD:3.2%PE RATIO:25
NET ASSET VALUE:90p*NET CASH: £17.1m
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201839.06.744.91.91
201942.44.923.52.10
% change+9-27-28+10
Ex-div:12 Dec   
Payment:23 Dec   
*Includes intangible assets of £84.3m, or 84p a share.