Relax and take stock10 Sep 2024 12:16
Let me have a go at assuaging everyone’s concerns (not least my own) following today’s unexpected announcement:
Clive, the incumbent Chair, is a successful entrepreneur in his own right within relevant fields, although perhaps he lacks experience within the alternative investments world (i.e. all things Alpha’s Alternative Banking), however it’s not like Morgan himself had a strong track record in this world before Alpha, so it’s obviously not a prerequisite to success. I would like to see divisional leadership of Alternative Banking strengthened however over time as it is both the major growth engine and cash cow.
This scenario is evidently not a case of a Chair stepping in as an emergency CEO on account of an unplanned CEO departure – clearly the timing is strategic with Clive coming to the end of his planned Chair tenure and being relieved of his other CEO duties due to the successful sale of TakePayments to Global Payments (notably not Clive’s first successful exit).
Although it would not typically be the Chair, in general (esp. when a company is on a strong growth trajectory) I prefer to see internal promotions to CEO rather than tapping the outside market. Parachuting in an outsider may make more sense where the underlying strategy needs a revamp or in a turnaround scenario, but Alpha currently has an unbroken equity story that requires continuity of execution for the time being, and with Clive’s 8-year tenure at the business he should be well positioned to deliver that.
Morgan has committed to retaining a minimum 10% shareholding for at least the next 3 years and I know that if I had >£100m (the vast majority of his net worth) tied up in a company that I founded, I would be remaining exceptionally close to the senior team, at least informally if not formally. That said, I don’t know if I fully buy Morgan’s rationale for not retaining a board seat which would obviously have been welcomed by the market – time will reveal the true reasons for that, the only real red flag in my view being if Morgan retaining a board seat would be prohibited on account of him taking a new executive function at another business. Best case scenario is he is simply exhausted after so long at the helm and needs a true reset which board formalities would not allow for.
With today’s drop, enterprise value is c. £700m. Trailing 12-month free cash flow to firm is about £93m, so it’s trading on c. 7.5x EV/FCFF. This for a business that’s growing its underlying revenues by c. 16% per annum in a highly subdued trading environment (on account of still high interest rates) whilst remaining highly cash generative on both an underlying basis and including the NTI tailwind which is here to stay.
I’m buying more and calling it a day.
Sign In
Follow the stocks
