Strong beat sees revenue and earnings forecasts brought forward a year
Alpha Financial Markets Consulting PLC (AIM:AFM) (LON: AFM) has announced that it expects to report fiscal 2022 (FY22) revenue and adjusted underlying earnings (EBITDA) significantly ahead of current market expectations. Consequently, we have raised our revenue and EBITDA forecasts by 13% for FY22 (to the end of March). This effectively brings our forecasts forward by a year and significantly lowers the odds on the management reaching its 2020 goal of doubling the business by 2024.
The growth in the business has been broad-based and the group is clearly benefiting from the acquisition of Lionpoint, the US-based consulting firm focused on the alternative investment industry, which boosted the group's position in North America and in the highly attractive alternative investment industry.
FY2022 significantly ahead of current market expectations
Management says that group trading has continued to be very positive, with strong client demand across all the group's “major geographic asset management and insurance consulting geographies”. It says North America has continued its excellent performance. This follows the acquisition of Lionpoint in May last year for up to US$90mln which more than doubled the size of the group's operations in North America. It says Lionpoint continues to trade strongly, delivering good revenue growth since the acquisition and investment in the Lionpoint team continues.
The company says that increased client demand has delivered strong double-digit organic net fee income growth compared to the prior year. It says that margins continue to be strong, lifted by higher than target consultant use levels given client demand, alongside an increasing but well-controlled variable cost base.
Cautiously optimistic
Management says the group has continued to deliver strong sales wins and grown its opportunity pipeline through the year. Further, it has entered FY23 with a strong balance sheet and with ongoing trading momentum. It says that while it remains positive that the medium-term underlying industry trends will continue to drive ongoing change programme client demand globally for Alpha, management is also mindful of the ongoing inflationary backdrop and geopolitical uncertainties.
Forecast changes
We have raised our revenue and adjusted EBITDA forecasts for FY22 by 13%. Given the global uncertainties, we have increased our FY23 and FY24 revenue and adjusted EBITDA forecasts more conservatively, 7% and 2% respectively. Our adjusted earnings per share (EPS) forecasts increase by 14%, 8% and 3% for the respective years. We will examine our forecasts more closely following the publication of the final results in June.
We have raised our revenue forecasts for FY22 by 13% to £157mln, while FY23 rises by 7% to £170mln and FY24 goes up by 2% to FY175mln. We have broadly maintained our adjusted EBITDA margin forecasts, moving up administration expenses accordingly. Hence our adjusted EBITDA forecast rise by 13% to £33.7mln in FY22, then increase by 7% to £36mln in FY23 and by 2% to £38.2mln in FY24. We have eased the assumption for average number of shares, hence our EPS forecasts rise by 14%, 8% and 3% in the respective years to 20.9p, 21.3p and 21.6p.
Forecast changes
Profit and loss
Source: Company accounts and Proactive Research
Valuation
The stock continues to look attractive relative to both its UK professional services and global consultancy peers, trading on 1.9x FY24 revenues and 8.8x adjusted EBITDA. The smaller declines in the ratios for Alpha FMC reflect our conservative assumptions for FY24.
Peer analysis
Source: Regulatory news, company websites and market sources. Alpha FMC data are generated from Proactive Research forecasts.