REG - Alfa Financial Soft - 2024 Half Year Report
05/09/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240905:nRSE9614Ca&default-theme=true
RNS Number : 9614C Alfa Financial Software Hldgs PLC 05 September 2024
5 September 2024
Alfa Financial Software Holdings PLC
2024 Half Year Report
Strong sales momentum, uptick in full year expectations
Alfa Financial Software Holdings PLC ("Alfa" or the "Company"), a leading
developer of software for the asset finance industry, today publishes its
unaudited results for the six months ended 30 June 2024 ("the period").
Financial highlights:
· Trading in the period in line with expectations
· Record TCV of £193m up 40% (H1 2023: £138m) driven by growth in
subscription revenue
· Next 12 months TCV up 20% to £72m (H1 2023: £60m) supporting
strong H2 2024 growth
· Continuous innovation with £18.8m investment in product (H1 2023:
£18.1m)
· Constant currency revenue in line with a strong H1 2023
· Operating profit margin 31% (H1 2023: 32%)
· Continued strong cash generation with 95% free cash flow conversion
· Robust balance sheet position with £22.0m of cash and no bank debt
· Special dividend of 4.2 pence per share (£12.4m) declared
Financial summary
Results
£m, unless otherwise stated H1 2024 Unaudited H1 2023 Unaudited Movement %
Revenue 52.3 52.9 (1)%
Operating profit 16.2 16.9 (4)%
Profit before tax 16.1 16.6 (3)%
Earnings per share - basic (p) 4.05 4.52 (10)%
Earnings per share - diluted (p) 4.00 4.45 (10)%
Special dividend per share (p) 4.2 4.0 5%
£m H1 2024 Unaudited 31 Dec 2023 Movement %
Audited
Cash 22.0 21.8 1%
Key measures ((1)) H1 2024 Unaudited H1 2023 Unaudited Movement
£m, unless otherwise stated %
Revenue - constant currency 52.3 52.2 0%
Cash generated from operations 18.8 26.2 (28)%
Operating free cash flow conversion (%) 95% 140% (45)%
Total Contract Value (TCV) 193 138 40%
((1) See definitions section for further information regarding calculation of
measures not defined by IFRS.)
( )
( )
Strategic highlights:
Accelerating transition to SaaS subscription model
· 18% growth in subscription revenues versus H1 2023
· 26% growth in subscription TCV versus H1 2023
· Subscription revenues have more than doubled since 2019, now
accounting for 35% of total revenues (2019: 23%)
Strong sales and delivery momentum
· Two new customer wins in H1
· Strong late-stage pipeline, increased to 11 prospects (H1 2023: 9)
· 8 out of 11 customers in late-stage pipeline working under letters
of engagement
· Accelerating recruitment to meet expected demand from the pipeline
Diversification of customer base over last five years
· Top five customers generated 34% of revenues (2019: 61%)
· 19 customers each contributing revenue over £1m in the six-month
period (2019: 7)
· Largest customer accounted for 8% of revenues (2019: largest
customer generated 20% of revenues)
Investment in product, people, planet
· Continuous innovation with £18.8m investment in product (H1 2023:
£18.1m)
· Five out of six Alfa Systems 6 instalments released to date
· Average headcount of 474 up 5% versus H1 2023 with high staff
retention (96%)
· Application approved to join United Nations Global Compact (UNGC)
to progress our ESG strategy
Outlook
The asset and automotive finance markets continue to remain strong with demand
for our software remaining robust. Alfa continues to remain well positioned
with software projects advancing steadily, customer relationships deepening,
new sales closing and promising new opportunities entering our pipeline.
As previously highlighted, FY 2023 revenue weighting had an unusual balance
because we had a particularly strong H1. For 2024, we continue to anticipate a
return to a more typical revenue pattern for the year, characterised by strong
revenue growth in the second half, driven by continued strong growth in
SaaS-based subscription revenue under-pinned by a record level of TCV.
Revenue at the start of H2 is tracking ahead of previous expectations and
the Board expects full year revenue to be £1m ahead of previous expectations.
Our encouraging new business pipeline, building confidence in the outlook and
our clear strategy mean that Alfa is able to continue to invest in technology
and people, whilst returning excess cash to shareholders through a progressive
ordinary dividend along with special dividends.
Andrew Denton, Chief Executive Officer
"We are pleased with performance during the first half of 2024, with trading
in line with expectations and good strategic progress delivered across the
business. We continue to invest in Alfa Systems 6 to increase our functional
and technical lead over the competition, whilst continuing to deliver reliably
for customers and converting and enhancing our order book.
The transition to a SaaS subscription business is well underway and is leading
to strong growth in high quality subscription revenues, resulting in increased
revenue visibility and customer stickiness. Alfa is the go-to market leader in
North American automotive finance software. We also have our first customer
for the Total Originations product line which significantly expands the size
of our addressable market. This demonstrates our ability to go deep into
specific markets, gaining momentum as we win class leading customers.
Consistent growth and delivery over the last five years shows that we have the
right strategy and we are confident in the outlook for the business."
Enquiries
Alfa Financial Software Holdings PLC +44 (0)20 7588 1800
Andrew Denton, Chief Executive Officer
Duncan Magrath, Chief Financial Officer
Andrew Page, Executive Chairman
Barclays +44 (0)20 7623 2323
Robert Mayhew
Anusuya Gupta
Investec +44 (0)20 7597 4000
Patrick Robb
Virginia Bull
Teneo +44 (0)20 7353 4200
James Macey White
Victoria Boxall
Investor and analyst webcast
The Company will host a conference call today at 09:45am. To obtain details
for the conference call, please email alfa@teneo.com (mailto:alfa@teneo.com) .
Please dial in at least 10 minutes prior to the start time.
An archived webcast of the call will be available on the Investors page of the
Company's website https://www.alfasystems.com/en-eu/investors
(https://www.alfasystems.com/en-eu/investors)
Notes to editors
Alfa has been delivering leading-edge technology to the global asset finance
and leasing industry since 1990. Our specialised expertise enables us to
deliver the most challenging systems transformation projects successfully.
Alfa Systems, our class-leading SaaS platform, is at the heart of the world's
largest and most progressive asset finance operations. Supporting all types of
automotive, equipment and wholesale finance, Alfa Systems is proven at volume
and across borders, and trusted by leading brands to manage complex
portfolios, drive efficiency and sustainability, and enhance the customer
experience.
With full functionality for originations, servicing and collections, Alfa
Systems is live in 37 countries, representing an integrated point solution, a
rapid off-the-shelf implementation, or an end-to-end platform for the complex
global enterprise. Alfa Systems 6, a breakthrough iteration of our software
platform, launched in 2024.
Alfa maintains exceptional customer satisfaction through an impeccable track
record, with our experience and performance unrivalled in the industry. Our
customers stick with us for the long term, because we deliver value that lasts
for decades.
Alfa has offices in Europe, Australasia and the Americas. For more
information, visit us at alfasystems.com or on LinkedIn.
Forward-looking statements
This Half Year Report (HYR) has been prepared solely to provide additional
information to shareholders to assess the Group's strategies and the potential
for those strategies to succeed. The HYR should not be relied on by any
other party or for any other purpose. This report contains certain
forward-looking statements. All statements other than statements of
historical fact are forward-looking statements. These include statements
regarding Alfa's intentions, beliefs or current expectations, and those of our
officers, directors and employees, concerning (without limitation), with
respect to the financial condition, results of operations, liquidity,
prospects, growth, strategies and businesses of Alfa. These statements and
forecasts involve known and unknown risks, uncertainty and assumptions because
they relate to events and depend upon circumstances that will or may occur in
the future and should therefore be treated with caution. There are a number
of factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. These forward-looking statements are made only as at the date of
this announcement. Nothing in this announcement should be construed as a
profit forecast. Except as required by applicable law, Alfa disclaims any
obligation or undertaking to update the forward-looking statements or to
correct any inaccuracies therein, or to keep current any other information
contained in the HYR. Accordingly, reliance should not be placed on any
forward-looking statements.
BUSINESS REVIEW
Strong strategic progress
In the first half of 2024 we have made significant strategic progress. We have
increased our functional lead over the competition with five of the six
instalments of Alfa Systems 6 now released. We have seen continued strong
growth in subscription revenues, as we continue our transition to a SaaS
business.
In H1 we converted two late-stage pipeline customers into wins and the depth
of the pipeline means that these were quickly replaced in the late-stage
pipeline. This demand has led us to increase our recruitment targets in both
EMEA and the US.
We have started H2 by converting a very large US Auto prospect. This is a
landmark win for Alfa because of the size and brand recognition of this
manufacturer and because we will be implementing our new Total Originations
product line as part of the project. We have also added another US Auto
prospect into the late-stage pipeline.
Our delivery excellence has continued with thirteen delivery events in the
first half of the year.
Strong growth in subscription revenues
Financial performance in the first half was as expected, with revenue flat on
a constant currency basis relative to a strong H1 2023 or down 1% at actual
exchange rates to £52.3m (H1 2023: £52.9m). Subscription revenues continued
to grow strongly up 18%. Services revenue was down 1% on H1 2023, which was
impacted by the number of projects passing their go-live milestone events. As
expected software revenue in H1 2024 was down 33% on H1 2023 as we invested in
Alfa Systems 6 versus a very strong chargeable period for last year.
Operating profit was £16.2m (H1 2023: £16.9m) as a result of the small
reduction in reported revenue. Cash conversion in the period was 95% (H1 2023:
140%), as expected and previously flagged, and was due to the unwinding of the
impact of an unusually high level of receipts just before Dec 2023 year end.
As previously highlighted, cash conversion will trend over time to 100%. We
finished the period with net cash of £22.0m (31 Dec 2023: £21.8m).
Pipeline conversions driving very strong TCV growth
We saw a significant growth in our TCV in Q1 with the conversion of two large
prospects and maintained this level of TCV through Q2 with Total Contract
Value ("TCV") growing 40% to £193m (H1 2023: £138m) from 30 June 2023. This
increase in TCV has been underpinned by a 26% growth in our subscription
revenues TCV showing how the transition to a subscription model is
underpinning future revenues.
We had 19 customers each contributing revenues of more than £1m in the period
(£2m on an annualised basis), up from just seven in 2019. We have
significantly reduced our customer concentration, with our top five customers
representing 34% of our revenues in H1 2024, compared with 61% in 2019. Our
largest customer represented just 8% of our revenues in the first half.
Headcount growth, supported by strong retention
Following very strong recruitment in 2021 and 2022, and as a result of our
very high retention rate of 96% in 2023, we deliberately slowed recruitment in
2023 and into the first half of 2024. This was to ensure the quality of the
experience for new joiners as we consolidated experience levels within the
team as a whole. We are now able to increase recruitment and given the
strength of the late-stage pipeline we are now accelerating recruitment plans
to meet the expected demand for our implementation teams.
In H1 2024 the retention rate was maintained at the very high level of 96%.
Headcount as at 30 June 2024 was up 5% at 484 (H1 2023: 462) with average
headcount in the period of 474 (H1 2023: 453) also up 5% on last year.
Capital return
We remain a strongly cash-generative business, with cash conversion of 95% in
H1 2024. We expect cash conversion to trend towards 100% over time. We are
committed to investing in our product and people to ensure that we continue to
offer market leading solutions and excellent delivery and service to our
customers. We continue to generate more cash than we need for our growth plans
and will continue to return excess cash to shareholders.
Our main mechanism for returning capital is the payment of a regular, ordinary
dividend and we have a policy to grow this progressively. To ensure that we
retain the flexibility to invest in the business as required, our ordinary
dividends are set at a sustainable level and we have historically made one-off
returns of additional excess capital through the payment of special dividends.
Notwithstanding the return of £9.7m excess cash to shareholders during the
first half, in respect of the payment of FY 2023 dividends announced at the
time of the FY 2023 results, we ended the period with net cash of £22.0m. As
such, the Board has today declared a special dividend of 4.2 pence per share
with an ex-dividend date of 26 September 2024, a record date of 27 September
2024 and a payment date of 8 November 2024. The special dividend would amount
to a total payment of c.£12.4m.
Steady market conditions
Whilst over the last few years the macro environment has been uncertain, the
asset finance market and demand for software within it has remained robust.
The asset finance market is a more secure form of lending and it has a history
of gaining market share in uncertain times compared with non-asset backed
lending markets. Alfa Systems is operational in 37 countries; in automotive
finance, equipment finance and wholesale and loan finance; for OEMs, banks and
independents and across all asset classes. The breadth and diversity of Alfa's
business interests has helped insulate us from any underlying economic
uncertainty in individual markets.
Strong pipeline
We are delighted to have converted two further prospects in the late-stage
pipeline in Q1 giving a significant boost to TCV. These two wins were replaced
by additional new prospects entering the late-stage pipeline and at 30 June
2024 we had a total of 11 prospects in the late stage, with eight where we
are already performing paid work under letters of engagements on
implementations as we finalise commercial contracts. In H2 we have converted
one very large US Auto customer with an initial TCV value of £19m and we
expect to shortly convert another key prospect.
We continue to see new prospects coming into the early-stage pipeline, showing
that the buying dynamics of the market remain unchanged.
We remain confident in both the demand for our best in class software and our
ability to win work in the market.
Net-zero commitment and UNGC
The majority of our emissions come from our supply chain so engaging with
suppliers and working with them to reduce these emissions is fundamental to
the overall success of us achieving our SBTi targets. During H1 2024 we
started this engagement process with our key suppliers.
We have also joined the UN Global Compact (UNGC) which will help us drive
forwards our corporate sustainability agenda.
Outlook
The asset and automotive finance markets continue to remain strong with demand
for our software remaining robust. Alfa continues to remain well positioned
with software projects advancing steadily, customer relationships deepening,
new sales closing and promising new opportunities entering our pipeline.
As previously highlighted, FY 2023 revenue weighting had an unusual balance
because we had a particularly strong H1. For 2024, we continue to anticipate a
return to a more typical revenue pattern for the year, characterised by strong
revenue growth in the second half, driven by continued strong growth in
SaaS-based subscription revenue under-pinned by a record level of TCV. Revenue
at the start of H2 is tracking ahead of previous expectations and the Board
expects full year revenue to be £1m ahead of previous expectations.
Our encouraging new business pipeline, building confidence in the outlook and
our clear strategy means that Alfa is able to continue to invest in technology
and people, whilst returning excess cash to shareholders through a progressive
ordinary dividend along with special dividends.
FINANCIAL REVIEW
Financial results
H1 2024 H1 2023 Movement
£m Unaudited Unaudited %
Revenue 52.3 52.9 (1)%
Gross profit 32.9 33.7 (2)%
Operating profit 16.2 16.9 (4)%
Profit before tax 16.1 16.6 (3)%
Taxation (4.2) (3.3) 27%
Profit for the period 11.9 13.3 (11)%
Revenues decreased by 1% or £0.6m to £52.3m in the six months ended 30 June
2024 (H1 2023: £52.9m). On a constant currency basis, revenues were in line
with last year. Revenues grew strongly in the US, up 20%, with declines in
other regions as projects reached go-live. The US accounted for 40% (H1 2023:
32%) of revenues.
Gross profit decreased to £32.9m (H1 2023: £33.7m) down £0.8m, with gross
margin at 62.9% (H1 2023: 63.7%) with the reduction in gross margin as a
result of increased headcount. Operating expenses were in line with last year
so operating profit decreased by £0.7m to £16.2m (H1 2023: £16.9m) with
profit before tax of £16.1m (H1 2023: £16.6m).
The Effective Tax Rate ("ETR") for the 2024 half year is 26.1% (H1 2023:
19.9%), the increase being principally due to the impact of the increase in
the UK Corporation Tax rate from 23.5% to 25.0% for 2024 and the change in
R&D relief. For the full year 2024 we expect the ETR to be around 26%
(2023 full year ETR: 20.6%). Profit for the period was £11.9m (H1 2023:
£13.3m).
Revenue
Revenue - by type H1 2024 H1 2023 Movement
£m Unaudited Unaudited %
Subscription 18.1 15.4 18%
Software 6.0 8.9 (33)%
Services 28.2 28.6 (1)%
Total revenue 52.3 52.9 (1)%
Subscription - Strong growth in subscription revenues
Subscription revenues arise from revenues from SaaS and other recurring
services
Overall subscription revenues increased strongly by 18% to £18.1m (H1 2023:
£15.4m) with growth driven from both new and existing customers. Subscription
customers now total 36 (H1 2023: 34).
We have a single-tenant SaaS solution. We and our customers benefit from a
single standard code-set and database, but with multi-layer data segregation
as opposed to code-based segregation used in multi-tenant SaaS models. One of
the big benefits of this approach is that customers can control their release
cycles rather than having a timetable dictated to them. We mitigate the extra
cost from this approach by encouraging customers to share branches and release
dates.
Our SaaS services are ISO 27001 and ISO 27018 certified and SOC1 and SOC2
audited to confirm compliance with controls around data security and
availability. Given the mission-critical nature of our systems to our
customers, having such third-party verification of our compliance with these
standards is a key selling point.
Software - Chargeable development down as we invested in Alfa Systems 6
Software revenues largely arise from chargeable development work for new and
existing customers, along with some perpetual licence recognition
As expected, Software revenue for the period reduced by 33% on H1 2023.
Following a very strong first half of 2023 for customer funded development
days, in the second half of 2023 and in the first half of 2024 we saw a
reduction in chargeable days as we focused on the launch of Alfa Systems 6. We
also saw a reduction in the customised perpetual licence recognition down to
£1.1m in the period (H1 2023: £2.4m) as a consequence of the successful
transition to a subscription SaaS model. There were one-off licence revenues
of £0.5m (H1 2023: £0.3m).
Our strategy is to continue to develop our software, to ensure that we meet
and exceed customer and market needs as they evolve and as the regulatory and
commercial environment continues to change. We have the industry leading
software and we continue to invest to increase that lead, through a balance of
customer funded development and self-funded development.
Services - High quality services with thirteen delivery events
Services revenues arise from work for existing customers delivering new
modules, upgrades, migrations and other services, as well as work with new
customers on project definition and implementation of Alfa Systems.
A number of implementation projects successfully went live in the second half
of 2023, with work reducing afterwards and with the impact of new projects
starting up not being fully felt until the second half of 2024, so overall
services revenues decreased by 1% to £28.2m (H1 2023: £28.6m) at actual
exchange rates.
Total revenues from existing customers, including V4 to V5 upgrades was 71%
(H1 2023: 67%), within this, as expected, V4 to V5 upgrades are slowing down
as we come to the end of that program and they accounted for 16% (H1 2023:
17%) of total services revenue. As V4 to V5 projects are replaced by new
projects this will further boost subscription revenues due to the higher
incremental subscription revenues they will generate in the future.
We had thirteen delivery events in the year including one v4 to v5 go-live.
Increasing our use of partners is a key element of our longer-term strategy
for increasing the number of implementations we can deliver and provides us
with a more flexible implementation resource. Our programme is well developed
in Europe and is starting to increase in the US to help with the strong demand
we see out there.
Total Contract Value (TCV)
TCV - by type (unaudited) 2024 2023 2023
£m H1 FY HY
Subscription 129 119 102
Software 17 18 15
Services 47 28 21
Total TCV 193 165 138
Definition of TCV is included in the definitions section of this Half Year
Report
Total contract value (TCV) at 30 June 2024 was £193m (31 December 2023:
£165m, 30 June 2023: £138m). TCV grew strongly on the back of the two wins
in the first half along with continuing growth in subscription TCV. One
prospect in the late-stage pipeline, with an initial TCV value of £19m, was
converted into a win in H2 and so is not included in the above figures.
Of the TCV at 30 June 2024, £72m (H1 2023: £60m) is currently anticipated to
convert into revenue within the next 12 months. The subscription portion
increased strongly, up £7m or 21% to £40m (H1 2023: £33m). Software
revenues were up £4m to £10m (H1 2023: £6m) due to confirmed development
work on new projects, with the services element of £22m (H1 2023: £21m) also
up.
Operating profit
The Group's operating profit decreased by £0.7m to £16.2m in H1 2024 (H1
2023: £16.9m) primarily reflecting the £0.6m decrease in revenue due to the
investment in Alfa Systems 6.
Headcount numbers were up 5% at 30 June 2024 at 484 (H1 2023: 462), with
average headcount of 474 up 5% on last year (H1 2023: 453). Staff retention
remained high at 96% on a 12 month basis, and this is up from 95% at 30 June
2023 and 85% at 30 June 2022.
Expenses - net H1 2024 H1 2023 Movement
£m Unaudited Unaudited %
Cost of sales 19.4 19.2 1%
Sales, general and administrative expenses 17.0 17.0 0%
Other income (0.3) (0.2) 50%
Total expenses - net 36.1 36.0 0%
Cost of sales increased by £0.2m to £19.4m (H1 2023: £19.2m) to support the
growth in the business. This was due to higher headcount and salary costs
along with increased hosting costs from the increasing scale of that business,
offset by higher capitalisation of intangible software as our engineering
resources focused on Alfa Systsems 6 as opposed to chargeable client work.
Sales, general and administrative (SG&A) was unchanged at £17.0m in the
six-month period to 30 June 2024 (H1 2023: £17.0m). Salary costs were up 5%
in the period to £6.8m (2023 H1: £6.4m). Profit Share Pay, including
employer's costs, in the period was £1.8m (2023 H1: £2.1m). Share-based
payment charges have decreased over last year by £0.4m to £0.5m (H1 2023:
£0.9m), principally due to reassessment of performance outturn. Foreign
currency gains/losses were nil down from the gain of £0.1m last year.
Travel and conference costs were in line with last year. Other costs
totalling £7.3m increased £0.2m on last year (H1 2023: £7.1m) with, as
expected, increased computer costs. The first half of 2023 included £0.5m of
costs related to possible offers for Alfa.
Profit before Tax
Overall Profit before Tax of £16.1m was down 3% on last year (H1 2023:
£16.6m). Net finance costs reduced to £0.1m (H1 2023: £0.2m) due to a small
increase in interest income.
Profit for the period
Profit after taxation reduced by £1.4m, or 11%, to £11.9m (H1 2023:
£13.3m). The Effective Tax Rate ("ETR") for the 2024 half year is 26.1% (H1
2023: 19.9%), with H1 2023 benefiting from a prior year R&D claim. For
the full year 2024 we expect the ETR to be around 26.0% (2023 full year ETR:
20.6%). The increase in the ETR is principally due to the increase in the UK
Corporation Tax rate from 23.5% to 25% in 2024 and the reduced benefit of
R&D claims under the RDEC scheme being disclosed in other income as
opposed to within tax.
Earnings per share
Basic earnings per share decreased by 10% to 4.05 pence (H1 2023: 4.52 pence).
Diluted earnings per share also decreased by 10% to 4.00 pence (H1 2023: 4.45
pence).
Cash flow
As expected, cash generated from operations was down year on year at £18.8m
(H1 2023: £26.2m) due to the impact of some receipts received in December
2023 which we would have expected to receive in January 2024, along with a
higher level of capex from investment in Alfa Systems 6. Net cash generated
from operating activities was £13.9m (H1 2023: £22.6m) with tax payments of
£4.6m up on the £3.4m for H1 2023.
Net cash (including the effect of exchange rate changes) increased by £0.2m
to £22.0m at 30 June 2024, from £21.8m at 31 December 2023. There was
£13.9m of net cash generated from operating activities (H1 2023: £22.6m). We
returned £9.7m of cash to shareholders in the period, in respect of the FY
2023 Final Dividend and a 2023 Special Dividend (H1 2023: £7.9m). Purchases
of own shares in the period were £0.8m (H1 2023: £4.7m) down on last year as
they were purely for shares into the Employee Benefit Trust, whereas last year
there were also treasury shares purchased in the period. Net capital
expenditure of £2.8m was up on last year (H1 2023: £1.7m) with as expected
increased capitalisation of software up to £2.7m (H1 2023: £1.0m) and with
other capex of £0.1m (H1 2023: £0.7m).
The Group's Operating Free Cash Flow Conversion (FCF) of 95% (H1 2023: 140%)
benefited from annual maintenance payment receipts, although these are
declining in impact on overall cashflow profile as we move to a subscription
model. This change will, as previously noted, result in moving cash conversion
on average to around 100%. In the first half the cash conversion was also
impacted by receipts received in December 2023 that we would normally have
expected to be received in January 2024.
Balance sheet
The significant movements in the Group's balance sheet, aside from the cash
balance which is described above, from 31 December 2023 to 30 June 2024 are
detailed below.
As expected, trade receivables increased from the very low level at 31
December 2023 of £5.6m, which had benefited from some early payments from
customers, to £6.4m at 30 June 2024. Accrued income increased from the year
end position to £6.2m (31 December 2023: £4.6m) with the increase largely
due to one customer where we were awaiting a purchase order before the work
could be invoiced. Corporation Tax recoverable of £2.7m (31 December 2023:
£1.9m) is principally due to amounts expected to be received related to
R&D claims.
Trade and other payables balance decreased by £0.5m to £9.5m at 30 June 2024
(31 December 2023: £10.0m).
Contract liabilities relating to software licences decreased by £0.2m to
£7.8m at 30 June 2024 (31 December 2023: £8.0m). Contract liabilities from
deferred maintenance increased to £10.8m (31 December 2023: £6.2m)
reflecting the timing of billing of a number of annual maintenance contracts
on 1 May.
Subsequent events and related parties
There have been no subsequent events or related party transactions.
PRINCIPAL RISKS AND UNCERTAINTIES
Principal risks and uncertainties which could have a material impact on the
long-term performance of Alfa Financial Software Holdings PLC and its
subsidiaries were set out in the Alfa Financial Software Holdings PLC Annual
Report for the year ended 31 December 2023, dated 13 March 2024, and remain
valid at the date of this report.
Those risks and uncertainties at the date of this report where the impact
continues to be assessed as "Major" and where the probability of the event is
assessed as at least "Possible" were:
Socio-economic and geo-political risk: the risk of global and local economic
downturn, having the potential to reduce our customers' and prospects'
spending on our services, potentially impacted by recent events including the
ongoing Ukraine war, conflict in the Middle East and the knock-on economic
impacts of the COVID-19 pandemic. Despite recent reductions in inflation and
interest rates, they remain higher than the recent longer-term trend, and
could also impact customers' and prospects' spending on our services.
Risk to people, teams and skills: talent recruitment, training and retention
may not keep pace with our forecasts, preventing us fulfilling obligations to
customers or taking on new business.
IT security and cyber risks: a targeted attack could adversely affect our
customers' or potential customers' perception of Alfa Systems and could impact
our ability to operate our business.
Competition risk: competitors may gain market share in target markets,
impacting our growth potential.
Since the Annual Report, the following risk has been removed from the
principal risks, as significant mitigating infrastructure decommissioning
actions have been completed:
Legacy versions of Alfa Systems continue to be supported for a number of
customers. The infrastructure management and support of these may become
expensive, time-consuming and insecure in the period leading up to complete
decommissioning.
UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2024
£m Note H1 2024 H1 2023
Unaudited Unaudited
Continuing Operations
Revenue 3 52.3 52.9
Cost of sales (19.4) (19.2)
Gross profit 32.9 33.7
Sales, general and administrative expenses (17.0) (17.0)
Other operating income 0.3 0.2
Operating profit 4 16.2 16.9
Share of results of associates and joint ventures - (0.1)
Profit before net finance costs and tax 16.2 16.8
Finance income 0.2 0.1
Finance costs (0.3) (0.3)
Profit before tax 16.1 16.6
Tax expense 6 (4.2) (3.3)
Profit for the period attributable to owners of the parent 11.9 13.3
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation of foreign operations - (0.2)
Total comprehensive income, net of tax - (0.2)
Total comprehensive income for the period attributable to owners of the parent 11.9 13.1
Earnings per share (in pence)
Basic 4.05 4.52
Diluted 4.00 4.45
The consolidated statement of profit or loss and comprehensive income should
be read in conjunction with the accompanying notes.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
£m Note 30 June 31 Dec 2023
2024
Audited
Unaudited
Assets
Non-current assets
Goodwill 7 24.7 24.7
Other intangible assets 8 7.3 5.0
Property, plant and equipment 9 0.8 1.0
Right-of-use assets 10 7.3 6.1
Deferred tax assets 0.2 0.3
Total non-current assets 40.3 37.1
Current assets
Trade receivables 11 6.4 5.6
Accrued income 12 6.2 4.6
Prepayments 12 3.9 3.8
Other receivables 12 0.1 0.3
Corporation tax receivable 12 2.7 1.9
Cash and cash equivalents 22.0 21.8
Total current assets 41.3 38.0
Total assets 81.6 75.1
Liabilities and equity
Current liabilities
Trade and other payables 13 9.5 10.0
Lease liabilities 14 0.7 1.4
Contract liabilities 13 18.6 14.2
Total current liabilities 28.8 25.6
Non-current liabilities
Lease liabilities 14 8.4 6.8
Provisions for other liabilities 13 0.6 0.7
Total non-current liabilities 9.0 7.5
Total liabilities 37.8 33.1
Capital and reserves
Share capital 0.3 0.3
Translation reserve 0.2 0.2
Own shares 15 (7.9) (8.7)
Retained earnings 51.2 50.2
Total equity 43.8 42.0
Total liabilities and equity 81.6 75.1
The consolidated statement of financial position should be read in conjunction
with the accompanying notes.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2024
£m Note Share Own shares Translation reserve Retained Equity
capital
earnings
attributable to owners of the parent
Balance as at 1 January 2023 0.3 (7.5) 0.4 48.8 42.0
Profit for the financial period - - - 13.3 13.3
Other comprehensive income - - (0.2) - (0.2)
Total comprehensive income for the period - - (0.2) 13.3 13.1
Equity settled share-based payment schemes - - - 0.7 0.7
Equity settled share-based payment schemes - deferred tax impact - - - (0.4) (0.4)
Dividends - - - (7.9) (7.9)
Own shares distributed - 4.0 - (3.8) 0.2
Own shares acquired - (4.7) - - (4.7)
Balance as at 30 June 2023 0.3 (8.2) 0.2 50.7 43.0
Balance as at 1 January 2024 0.3 (8.7) 0.2 50.2 42.0
Profit for the financial period - - - 11.9 11.9
Other comprehensive income - - - - -
Total comprehensive income for the period - - - 11.9 11.9
Equity settled share-based payment schemes - - - 0.2 0.2
Equity settled share-based payment schemes - deferred tax impact - - - 0.1 0.1
Dividends - - - (9.7) (9.7)
Own shares distributed 15 - 1.6 - (1.5) 0.1
Own shares acquired 15 - (0.8) - - (0.8)
Balance as at 30 June 2024 0.3 (7.9) 0.2 51.2 43.8
The consolidated statement of changes in equity should be read in conjunction
with the accompanying notes.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2024
£m Note H1 2024 H1 2023
Unaudited Unaudited
Cash flows from operations
Profit before tax 16.1 16.6
Net finance costs 0.1 0.2
Share of net loss from joint venture - 0.1
Operating profit 16.2 16.9
Adjustments:
Depreciation 9/10 0.8 0.9
Amortisation 8 0.4 0.5
Share-based payment charge 0.2 0.7
Research and Development Expenditure Credit (0.3) -
Movement in provisions (0.1) (0.3)
Movement in working capital:
Movement in contract liabilities 4.4 5.6
Movement in trade and other receivables (2.3) (0.3)
Movement in trade and other payables (0.5) 2.2
(excluding contract liabilities)
Cash generated from operations 18.8 26.2
Interest element on lease payments (0.3) (0.2)
Income taxes paid (4.6) (3.4)
Net cash generated from operating activities 13.9 22.6
Cash flows from investing activities
Purchases of property, plant and equipment 9 (0.1) (0.7)
Payments for internally developed software 8 (2.7) (1.0)
Additions of right-of-use assets (0.2) -
Interest received 0.2 -
Net cash used in investing activities (2.8) (1.7)
Cash flows from financing activities
Dividends paid to Company shareholders 18 (9.7) (7.9)
Principal element of lease payments 14 (0.6) (0.8)
Purchase of own shares 15 (0.8) (4.7)
Net cash used in financing activities (11.1) (13.4)
Net increase in cash and cash equivalents - 7.5
Cash and cash equivalents at the beginning of the period 21.8 18.7
Effect of foreign exchange rate changes on cash 0.2 0.1
and cash equivalents
Cash and cash equivalents at the end of the period 22.0 26.3
The consolidated cash flow statement should be read in conjunction with the
accompanying notes.
Notes to the Condensed Consolidated Half Year Financial Statements for the six
months ended 30 June 2024
1. General information
Alfa Financial Software Holdings PLC ("Alfa" or the "Company") is a public
company limited by shares and is incorporated and domiciled in England. Its
registered office is at Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT,
United Kingdom. Alfa's company registration number is 10713517.
The principal activity of the Company and its subsidiaries (the "Group") is to
provide software solutions and consultancy services to the auto and equipment
finance industry in the United Kingdom, North America, Europe, Australasia and
Africa.
These unaudited Half Year Financial Statements have been approved for issue by
the Board of Directors on 4 September 2024. These Half Year Financial
Statements have been reviewed but not audited.
2. Accounting policies
2(a) Basis of preparation
The Half Year Financial Statements have been prepared in accordance with IAS
34 "Half Year Financial Reporting" as contained in UK-adopted International
Accounting Standards and the Disclosure and Transparency Rules of the
Financial Conduct Authority.
These Half Year Financial Statements do not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006. Accordingly, this report
should be read in conjunction with the annual report for the year ended 31
December 2023 (the "Annual Financial Statements") which was prepared in
accordance with UK-adopted International Accounting Standards and any public
announcements made by Alfa during the Half Year reporting period. The Annual
Financial Statements constitute statutory accounts as defined in section 434
of the Companies Act 2006 and a copy these statutory accounts has been
delivered to the Registrar of Companies. The auditor's report on the Annual
Financial Statements was not qualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under section 498(2) or
(3) of the Companies Act 2006.
The accounting policies adopted in the preparation of the Half Year Financial
Statements are consistent with those used to prepare Alfa's consolidated
financial statements for the year ended 31 December 2023 and the corresponding
Half Year reporting period.
The preparation of the Half Year Financial Statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. In preparing
these Half Year Financial Statements, the significant judgements made by
management in applying the Group's accounting policies were the same as those
that applied to the consolidated Annual Financial Statements described above.
With respect to the key sources of estimation uncertainty disclosed in the
consolidated Annual Financial Statements, it is noted that over the last few
years we have increasingly moved to selling subscription licences in place of
perpetual licences, and this has resulted in a decrease in the significance of
the customised licence estimates and related judgements.
The Half Year Financial Statements have been prepared on a going concern
basis, under the historical cost convention.
2(b) Going concern
The Half Year Financial Statements are prepared on the going concern basis.
The Group continues to be cash-generative and the Directors believe that the
Group has a resilient business model. The Group meets its day-to-day working
capital requirements through its cash reserves generated from operating
activities. The Group's forecasts and projections, taking account of planned
dividend payments and reasonably possible changes in trading performance, show
that the Group has sufficient cash reserves to operate for a period of not
less than 12 months from the date of approval of these Half Year Financial
Statements.
The going concern assessment performed also includes downside stress testing
in line with FRC guidance which demonstrates that even in the most extreme
downside conditions considered reasonably possible, given the existing level
of cash held, the Group would continue to be able to meet its obligations as
they fall due, without the need for substantive mitigating actions.
On this basis, the Directors consider it appropriate to continue to adopt the
going concern basis of accounting in preparing the Half Year Financial
Statements.
2(c) Changes in accounting policies
The Group has not adopted any new accounting standards in the period. Other
changes to accounting standards in the period had no material impact.
2(d) Seasonality
The Group is not normally significantly influenced by seasonality or cyclical
fluctuation because the Group's revenues are relatively consistent throughout
the year. The Group's revenue is influenced by the number and maturity of
software implementations during the period. Separately, the Group's cash
flows are subject to seasonal fluctuations because the Group invoices a
significant proportion of its customers for maintenance annually in advance in
the first six months of each year, resulting in a higher inflow of cash
receipts in the first half of the Group's financial year in respect of
maintenance revenues.
2(e) Foreign currency
The following exchange rates were used in the financial statements:
USD EUR AUD NZD
Average rate 6 months to:
30 June 2024 1.27 1.17 1.92 2.08
30 June 2023 1.23 1.14 1.82 1.98
Closing rate:
30 June 2024 1.26 1.18 1.89 2.07
31 Dec 2023 1.27 1.15 1.87 2.01
3. Segment information and revenue from contracts with customers
3(a) Revenue by stream
The Group assesses revenue by type of activity, being Subscription, Software
and Services, as summarised below:
£m H1 2024 H1 2023
Unaudited Unaudited
Subscription 18.1 15.4
Software 6.0 8.9
Services 28.2 28.6
Total revenue 52.3 52.9
3(b) Revenue by geography
Revenue attributable to each geographical market based on where the customer
mainly utilises its instance of Alfa, or where the service is rendered, is as
follows:
£m H1 2024 H1 2023
Unaudited Unaudited
UK 17.6 19.5
US 20.7 17.2
Rest of EMEA (excl. UK) 11.1 12.1
Rest of the World 2.9 4.1
Total revenue 52.3 52.9
3(c) Revenue by currency
Revenue by contractual currency is as follows:
H1 2024 H1 2023
£m Unaudited Unaudited
GBP 21.3 24.1
USD 21.0 17.7
EUR 7.1 7.0
Other 2.9 4.1
Total revenue 52.3 52.9
3(d) Liabilities from contracts with customers
H1 2024 H1 2023
£m Unaudited Unaudited
Contract liabilities - deferred licence 7.8 9.3
Contract liabilities - deferred maintenance 10.8 11.1
Total contract liabilities 18.6 20.4
3(e) Timing of revenue
Timing of revenue - the Group derives revenue from the transfer of goods and
services as follows over time and at a point in time in the following revenue
segments:
H1 2024 - £m Subscription Software Services Total revenue
At a point in time - time and materials - 3.2 23.6 26.8
At a point in time - fixed price - 0.5 - 0.5
Over time - time and materials - 1.4 4.6 6.0
Over time - fixed price 18.1 0.9 - 19.0
Total revenue 18.1 6.0 28.2 52.3
H1 2023 - £m Subscription Software Services Total revenue
At a point in time - time and materials - 5.5 20.1 25.6
At a point in time - fixed price - 0.3 - 0.3
Over time - time and materials - 2.0 8.5 10.5
Over time - fixed price 15.4 1.1 - 16.5
Total revenue 15.4 8.9 28.6 52.9
4. Operating profit
The following items have been included in arriving at operating profit in the
table below:
£m
H1 2024 H1 2023
£m Unaudited Unaudited
Research and development costs 1.5 1.5
Depreciation of property, plant and equipment 0.3 0.3
Depreciation of right-of-use assets 0.5 0.6
Amortisation of intangible assets 0.4 0.5
Foreign exchange loss/(gain) 0.2 (0.1)
Share-based payments 0.5 0.9
Costs related to possible offer* - 0.5
Gain on forward contract (0.2) (0.1)
* Costs related to possible offer of £0.5m were incurred in the first half of
2023 (2024 H1: nil) and comprised legal fees and expenses incurred as a result
of a possible offer for Alfa from a private equity firm called EQT.
5. Employee costs
H1 2024 H1 2023
£m Unaudited Unaudited
Wages and salaries* 22.0 20.6
Social security contributions (on wages and salaries) 2.6 2.3
Pension costs 1.7 1.5
Less: capitalisation* (2.7) (1.0)
23.6 23.4
Profit share pay** 1.8 2.1
Share-based payments*** 0.5 0.9
Total employment costs 25.9 26.4
* To be consistent with the current year disclosure, the prior year wages and
salaries number has been split into the amount that was expensed and the
amount that was capitalised as part of time spent on internally generated
intangibles. The net number is consistent with the 2023 Half Year Financial
Statements.
** Profit share pay refers to a pool of money (that equates to approximately
10% of the Group's pre-tax profits before charging profit share) which is
shared amongst the employees, excluding Directors and some other senior
managers, as a percentage of basic salary. The amount disclosed includes the
related social security contributions.
*** This includes the related social security contributions.
Average monthly number of people employed (including Directors) H1 2024 H1 2023
Unaudited Unaudited
UK 337 330
US 92 82
Rest of EMEA (ex UK) * 29 28
Rest of the World* 16 13
Total average monthly number of people employed 474 453
* To be consistent with the geographical split in note 3(b), the 'Rest of the
World' headcount disclosed in the prior year has been split into 'Rest of
EMEA' and 'Rest of the World'. The total remains unchanged.
At 30 June 2024 the Group had 484 employees (30 June 2023: 462).
6. Income tax expense
Income tax expense is calculated on management's best estimate of the full
financial year expected rate, which is then adjusted for discrete items
occurring in the reporting period.
The income tax expense for the six-month period ended 30 June 2024 was £4.2m
(H1 2023: £3.3m).
The Effective Tax Rate ("ETR") for the 2024 half year is 26.1% (H1 2023:
19.9%). The ETR for H1 2024 is impacted by adjustments relating to prior
years totalling £0.2m (in H1 2023 the ETR benefited due to a prior year
R&D claim of £0.9m).
For the full year 2024 we expect the ETR to be around 26% (2023 full year ETR:
20.6%), so trending towards the UK statutory tax rate of 25% (2023: 23.5%) and
taking into account the impact of the adjustments relating to prior years.
7. Goodwill
H1 2024 FY 2023
Unaudited Audited
Cost
At 1 January 24.7 24.7
At 30 June / 31 December 24.7 24.7
Goodwill arose on the acquisition of subsidiaries in 2012 as part of a group
reorganisation and represents the excess of the consideration transferred and
the amount of any non-controlling interest in the investment over the fair
value of the identifiable assets acquired and the liabilities and contingent
liabilities assumed.
We have assessed whether there are any indicators of impairment of goodwill.
Considering in particular the fact that we have experienced strong trading
performance during the six month period along with the carrying value of the
assets for the Company remaining significantly below the market capitalisation
of the Company, we found no indicators of impairment of goodwill. As a
consequence no formal goodwill impairment test has been carried out.
8. Other intangible assets
£m Computer software Internally generated software Total
Cost
At 1 January 2023 1.7 4.3 6.0
Additions - 2.8 2.8
At 31 December 2023 1.7 7.1 8.8
Amortisation
At 1 January 2023 1.0 2.1 3.1
Charge for the period 0.1 0.6 0.7
At 31 December 2023 1.1 2.7 3.8
Net book value
At 31 December 2023 0.6 4.4 5.0
Cost
At 1 January 2024 1.7 7.1 8.8
Additions - 2.7 2.7
Disposals (0.7) - (0.7)
At 30 June 2024 1.0 9.8 10.8
Amortisation
At 1 January 2024 1.1 2.7 3.8
Charge for the period 0.1 0.3 0.4
Disposals (0.7) - (0.7)
At 30 June 2024 0.5 3.0 3.5
Net book value
At 30 June 2024 0.5 6.8 7.3
Significant movement in other intangible assets
During H1 2024, Alfa developed new internally generated software at a cost of
£2.7m (H1 2023: £1.0m). This software will be amortised over three to five
years.
The total research and product development expense for H1 2024 was £1.5m (H1
2023: £1.5m) (see Note 4).
9. Property, plant and equipment
£m Fixtures and fittings IT equipment Total
Cost
At 1 January 2023 1.5 3.8 5.3
Additions 0.1 0.5 0.6
Disposals - (1.1) (1.1)
At 31 December 2023 1.6 3.2 4.8
Depreciation
At 1 January 2023 0.9 3.4 4.3
Charge for the period 0.2 0.4 0.6
Disposals - (1.1) (1.1)
At 31 December 2023 1.1 2.7 3.8
Net book value
At 31 December 2023 0.5 0.5 1.0
Cost
At 1 January 2024 1.6 3.2 4.8
Additions - 0.1 0.1
Disposals (0.1) (1.4) (1.5)
At 30 June 2024 1.5 1.9 3.4
Depreciation
At 1 January 2024 1.1 2.7 3.8
Charge for the period 0.1 0.2 0.3
Disposals (0.1) (1.4) (1.5)
At 30 June 2024 1.1 1.5 2.6
Net book value
At 30 June 2024 0.4 0.4 0.8
10. Right-of-use assets
£m Motor vehicles Property Total
Cost
At 1 January 2023 0.5 10.9 11.4
Additions 0.2 - 0.2
At 31 December 2023 0.7 10.9 11.6
Depreciation
At 1 January 2023 0.3 4.0 4.3
Charge for the period 0.2 1.0 1.2
At 31 December 2023 0.5 5.0 5.5
Net book value
At 31 December 2023 0.2 5.9 6.1
Cost
At 1 January 2024 0.7 10.9 11.6
Additions - 1.7 1.7
Disposals (0.3) - (0.3)
At 30 June 2024 0.4 12.6 13.0
Depreciation
At 1 January 2024 0.5 5.0 5.5
Charge for the period 0.2 0.3 0.5
Disposals (0.3) - (0.3)
At 30 June 2024 0.4 5.3 5.7
Net book value
At 30 June 2024 - 7.3 7.3
11. Trade receivables
The Group holds the following trade receivables:
H1 2024 FY 2023
£m Unaudited Audited
Trade receivables 6.4 5.6
Provision for impairment - -
Total trade receivables - net 6.4 5.6
Trade receivables ageing
Ageing of net trade receivables £m H1 2024 FY 2023
Unaudited Audited
Within agreed terms 6.0 5.0
Past due 1-30 days 0.4 0.6
Past due 31-90 days - -
Past due 91+ days - -
Trade receivables - net 6.4 5.6
The Group believes that the unimpaired amounts that are past due are fully
recoverable as there are no indicators of future delinquency or potential
litigation.
12. Other receivables
H1 2024 FY 2023
£m Unaudited Audited
Accrued income 6.2 4.6
Prepayments 3.9 3.8
Corporation tax recoverable 2.7 1.9
Other receivables 0.1 0.3
Total other receivables 12.9 10.6
Accrued income represents fees earned, but not invoiced, at the reporting
date, which have no right of offset with contract liabilities - deferred
licence amounts. Accrued income increased by £1.6m since last year-end driven
by invoice timing.
Prepayments include £1.2m (FY 2023: £1.3m) of deferred costs in relation to
costs to fulfil contracts.
13. Current and non-current liabilities
£m H1 2024 FY 2023
Unaudited Audited
Trade payables 0.6 0.5
Other payables 8.9 9.5
Contract liabilities - deferred licence and fees 7.8 8.0
Contract liabilities - deferred maintenance 10.8 6.2
Lease liabilities 9.1 8.2
Provisions for other liabilities 0.6 0.7
Total trade and other payables 37.8 33.1
Less: non-current portion (9.0) (7.5)
Total current liabilities 28.8 25.6
14. Lease liabilities
The following table sets out the reconciliation of the lease liabilities from
the 1 January 2023 to the amount disclosed at 30 June 2024:
£m Total
Lease liabilities recognised at 1 January 2023 9.3
Additions 0.2
Disposals -
Interest charge 0.4
Payments made on lease liabilities (1.7)
At 31 December 2023 8.2
Additions 1.5
Disposals -
Interest charge 0.3
Payments made on lease liabilities (0.9)
At 30 June 2024 9.1
Additions to lease liabilities include extensions to existing lease
agreements.
Below is the summary of timing of the lease payments:
£m H1 2024 FY 2023
Unaudited Audited
Non-current liability 8.4 6.8
Current liability 0.7 1.4
9.1 8.2
Below is the maturity analysis of the lease liabilities:
Maturity analysis H1 2024 FY 2023
Unaudited Audited
No later than 1 year 1.3 1.7
Between 1 year and 5 years 5.3 6.2
Later than 5 years 6.7 1.4
Total future lease payments 13.3 9.3
Total future interest payments (4.2) (1.1)
9.1 8.2
The group's net debt is made up of cash and cash equivalents and lease
liabilities. The movement during the period in lease liabilities is set out
above. These are the only changes in liabilities arising from financing
activities in the period. Movements in cash and cash equivalents are set out
in the cash flow statement.
15. Own shares
£m H1 2024 FY 2023
Unaudited Audited
Own shares at 1 January 8.7 7.5
Own shares acquired 0.8 4.8
Own shares distributed (1.6) (3.6)
At 30 June / 31 December 7.9 8.7
The own shares reserve represents the cost of shares in Alfa Financial
Software Holdings PLC that have been:
- Purchased and held by the Group's employee benefit trust to satisfy
options under the Group's share options plans. The number of shares held at H1
2024 was 106,662 (FY 2023: 721,036); and
- Purchased and held by the Group as a result of the share buyback
programme that was launched on 18 January 2022. The number of shares held at
H1 2024 was 4,775,119 (FY 2023: 4,775,119).
Own shares distributed relate to shares issued to employees for bonus awards
deferred in shares.
16. Financial and liquidity risk management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and price risk), credit risk and liquidity risk.
The Half Year Financial Statements do not include all financial risk
management information and disclosures required in the Annual Financial
Statements; they should be read in conjunction with the Annual Financial
Statements. The responsibility for risk management has remained with the
Board and there have been no changes to risk management policies since
year-end.
17. Controlling party and related party transactions
The ultimate parent undertaking as at 31 December 2023 was CHP Software and
Consulting Limited (the 'ultimate parent'), which was the parent undertaking
of the smallest and largest group in relation to these consolidated financial
statements. Following an internal reorganisation within the CHP group, the
ultimate parent (from 12 January 2024 onwards) is CHP Software and Consulting
Holdings Limited. The ultimate controlling party is Andrew Page. There was no
trading between the Group and the ultimate parent in H1 2024 or H1 2023.
In H1 2023 the Group sold two debentures to the ultimate parent for £0.2m (H1
2024: nil). The transaction was at arm's length.
In 2020, the Group invested £0.4m in Alfa iQ consisting of: a capital
contribution of £0.3m; and an interest-free loan fair valued at £0.1m. At 30
June 2024 the investment is carried at £nil (H1 2023: £0.1m) and the loan is
carried at £nil (H1 2023: £0.1m). This is because the activity in the Alfa
iQ joint venture ceased in late 2023 and the structure is in the process of
being formally dissolved. In H1 2023 Alfa Financial Software Limited paid
expenses of £0.1m (H1 2024: nil) on behalf of Alfa iQ Limited (relating to
computer costs and payroll) and these were fully recharged back to Alfa iQ
Limited at no mark up.
In H1 2023, the Group paid property expenses of £0.04m on behalf of the
ultimate parent and these were fully recharged back to the ultimate parent at
no mark up. In H1 2024, the Group has been invoiced for property expenses of
£0.005m on behalf of the ultimate parent and these have been fully recharged
back to the ultimate parent at no mark up.
Dividends to the amount of £5.6m were paid to the ultimate parent in H1 2024
(H1 2023: £4.8m).
At 30 June 2024 there was £nil balances outstanding from, or to, the ultimate
parent (30 June 2023: £nil).
18. Dividends
The Board declared a 2.0 pence per share Special dividend, amounting to
£5.9m, payable on 30 May 2024 with a record date of 3 May 2024. An ordinary
dividend of 1.3 pence per share for the year ended 31 December 2023 equating
to £3.8m was paid on 27 June 2024, with a record date of 31 May 2024.
The Board declared on 4 September 2024 a special dividend of 4.2 pence per
share, with an ex-dividend date of 26 September 2024, a record date of 27
September 2024 and a payment date of 8 November 2024. The special dividend
would amount to a total payment of c.£12.4m.
19. Subsequent events
There have been no reportable subsequent events.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed consolidated Half Year financial
statements (the 'Half Year Financial Statements') have been prepared in
accordance with International Accounting Standard 34, 'Half Year Financial
Reporting', as contained in UK-adopted international accounting standards and
that the Half Year management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred during the first
six months and their impact on the condensed Half Year Financial Statements,
and a description of the principal risks and uncertainties for the remaining
six months of the financial year; and
• material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
The current directors are listed below all of whom were directors during the
whole of the period, except as noted:
Andrew Page
Andrew Denton
Duncan Magrath
Matthew White
Steve Breach
Adrian Chamberlain
Charlotte de Metz
Chris Sullivan
Reena Raichura (appointed 3 June 2024)
By order of the Board
Duncan Magrath
Chief Financial Officer
4 September 2024
INDEPENDENT REVIEW REPORT TO ALFA FINANCIAL SOFTWARE HOLDINGS PLC
Conclusion
We have been engaged by Alfa Financial Software Holdings PLC ('the Company')
to review the condensed set of financial statements of the Company and its
subsidiaries (the 'Group') in the half-yearly financial report for the six
months ended 30 June 2024 which comprises the consolidated statement of profit
or loss and comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the consolidated
statement of cash flows and related notes 1 to 19. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent material misstatements of fact or material
inconsistencies with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with International Accounting Standard 34,
"Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards, and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued for use in
the United Kingdom. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK-adopted International Accounting Standards.
The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting" as contained in UK-adopted
International Accounting Standards.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group and
the Company to cease to continue as a going concern.
Responsibilities of Directors
The half-yearly financial report, is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with International Accounting
Standard 34, "Interim Financial Reporting" as contained in UK-adopted
International Accounting Standards and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group'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 the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Review of the Financial Information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our conclusion, including
our Conclusions Relating to Going Concern, are based on procedures that are
less extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information performed by the Independent Auditor of the Entity". Our review
work has been undertaken so that we might state to the Company those matters
we are required to state to them in an independent review 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, for our review work,
for this report, or for the conclusions we have formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
4 September 2024
DEFINITIONS
Constant currency
When the Company believes it would be helpful for understanding trends in its
business, the Company provides percentage increases or decreases in its
revenues or operating profit to eliminate the effect of changes in currency
values. When trend information is expressed herein "in constant currencies",
the comparative results are derived by re-calculating comparative non-GBP
denominated revenues and/or expenses using the average exchange rates of the
comparable months in the current reporting period.
Operating free cash flow (FCF) conversion
Operating FCF conversion is calculated as cash from operations, less capital
expenditures and the principal element of lease payments, as a percentage of
operating profit. Operating FCF is calculated as follows:
H1 2024 H1 2023
Unaudited £m £m
Cash generated from operations 18.8 26.2
Capital expenditure (2.8) (1.7)
Principal element of lease payments (0.6) (0.8)
Operating FCF generated 15.4 23.7
Operating FCF Conversion 95% 140%
Total contract value (TCV)
Total contract value ("TCV") - TCV is calculated by analysing future contract
revenue based on the following components:
(i) an assumption of three years of Subscription payments (including
maintenance, Cloud Hosting and subscription licence) assuming these services
continued as planned (actual contract length varies by customer);
(ii) the estimated remaining time to complete Services and Software
deliverables within contracted software implementations, and recognise
deferred licence amounts (which may not all be under a signed statement of
work); and
(iii) Pre-implementation and ongoing Services and Software work which is
contracted under a statement of work.
As TCV is a reflection of future revenues, forward looking exchange rates are
used for the conversion into GBP. The exchange rates used for the TCV
calculation are as follows:
Exchange rates used for TCV H1 2024 H2 2023 H1 2023
USD 1.27 1.25 1.30
EUR 1.17 1.15 1.18
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR LIMRTMTTMBRIRecent news on Alfa Financial Software Holdings
See all newsREG - Alfa Financial Soft - Person Closely Associated Notification
AnnouncementREG - Alfa Financial Soft - Holding(s) in Company
AnnouncementREG - Alfa Financial Soft - Holding(s) in Company
AnnouncementREG - Alfa Financial Soft - Appointment of Additional Corporate Broker
AnnouncementREG - Alfa Financial Soft - 2024 Half Year Report
Announcement