TIDMALFA
RNS Number : 5909R
Alfa Financial Software Hldgs PLC
02 March 2023
2 March 2023
Alfa Financial Software Holdings PLC
Full Year Report for the year ended 31 December 2022
Strong financial and operational performance,
record software delivery, Operating profit increases 20%
Alfa Financial Software Holdings PLC ("Alfa" or the "Company"),
a leading developer of software for the asset finance industry,
today publishes its audited results for the twelve months ended 31
December 2022.
Financial summary:
Years ended 31 December
Results 2022 2021 Movement
GBPm, unless otherwise stated %
------------------------------- ----- ----- ---------
Revenue 93.3 83.2 12%
Operating profit 29.6 24.7 20%
Profit before tax 28.9 23.8 21%
Earnings per share - basic
(p) 8.24 6.49 27%
Earnings per share - diluted
(p) 8.09 6.39 27%
Special Dividends paid in
year (p) 6.5 10.0 (35)%
Special Dividend declared
per share (p) 1.5 - -
Proposed ordinary dividend
(p) 1.2 1.1 9%
Movement
GBPm, unless otherwise stated 2022 2021 %
------------------------------- ----- ----- ---------
Cash 18.7 23.1 (19)%
Key measures (1) 2022 2021 Movement
GBPm, unless otherwise stated %
------------------------------------- ------ ------ ---------
Revenue - constant currency 93.3 86.5 8%
Cash generated from operations 34.0 31.3 9%
Operating free cash flow conversion
(%) 102% 114% (13)%
Total Contract Value (TCV) 142.9 133.1 7%
(1) See definitions section for further information regarding
calculation of measures not defined by IFRS.
Financial highlights (vs 2021):
-- Revenue up 12%
-- Operating profit up 20%
-- Subscription revenues up 17%
-- Continued strong free cash flow conversion over 100%
-- Robust balance sheet position with GBP19m of cash and no debt (excluding leases)
-- 3.6m shares purchased during the year (GBP5.6m) for Treasury and EBT
-- Total dividends of GBP22.5m paid in the year
-- Special dividend of 1.5 pence (cGBP4.4m) declared
-- Proposed final ordinary dividend of 1.2 pence (GBP3.6m)
-- GBP100m returned to shareholders in dividends and special dividends since November 2020
Strategic highlights
-- 75% of revenues recurring in nature; either subscription
revenues or services and software revenues with existing
customers
-- Partner days up by 58% compared with 2021
-- Continued diversification of our customer base; Top five
customers make up 35% of revenues in 2022 (2021: 37%, 2020: 48%,
2019: 61%)
-- TCV up by 7% compared with 2021 to GBP143m
-- Another record year of deliveries with 28 executed successfully in the year (2021: 27)
-- Alfa Systems version 5.7 released
-- Record level of employee engagement, retention at 90%
-- Investors in People Gold status achieved
-- Highest rated listed company and highest rated software
company in Newsweek's UK Most Loved Workplaces
Andrew Denton, Chief Executive Officer
"We have delivered a strong financial and operational
performance in 2022 and we have made significant progress towards
our strategic goals. We are particularly pleased with the quality
of our revenues with 75% of our overall revenues being recurring in
nature. We continued to invest in our class-leading product with
Alfa Systems 5.7 being released during the year and we have had
another record year of delivering for our customers. All of this
along with the strength of our late-stage pipeline, the quality of
our people and the demonstrable strength of our culture gives us
great confidence in Alfa's prospects for 2023 and beyond."
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
Teneo +44 (0)20 7353 4200
James Macey White
Ed Cropley
Barclays +44 (0)20 7623 2323
Robert Mayhew
Tom McDonald
Investec +44 (0)20 7597 4000
Patrick Robb
Virginia Bull
Investor and analyst webcast
The Company will host a conference call today at 09:30am. To
obtain details for the conference call, please
email alfa@tulchangroup.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, alfasystems.com/
investors.
Notes to Editors
Alfa has been delivering software systems and services to the
global asset and automotive finance industry since 1990. Our agile
methodologies and specialised knowledge of asset and automotive
finance enables the delivery of large software implementations and
highly complex business change projects. With an excellent delivery
track record now into its fourth decade, Alfa's experience and
performance is unrivalled in the industry.
Alfa Systems, our class-leading technology platform, is at the
heart of some of the world's largest asset and automotive finance
companies. Alfa Systems supports both retail and corporate business
for auto, equipment, wholesale and dealer finance on a
multijurisdictional basis, including leases/loans, originations and
servicing. A cloud-native, end-to-end solution with integrated
workflow and automated processing using business rules, Alfa
Systems provides compelling solutions to asset finance
companies.
Alfa Systems is currently live in 37 countries. Alfa has offices
in Europe, Australasia and North America. For
more information, visit www.alfasystems.com .
Forward-looking statements
This Full Year Report ("FYR") 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 FYR 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 FYR.
Accordingly, reliance should not be placed on any forward-looking
statements.
CEO's REVIEW
Strong performance
2022 has seen progress across all areas of our business. We have
continued to deliver successful implementations, supported by our
scalable and reliable cloud-native hosting solution, at the same
time as releasing significant enhancements to our software.
We saw a strong financial performance in the year with revenues
up 12% to GBP93.3m (2021: GBP83.2m) with growth across all of our
revenue streams. On a constant currency basis revenue was up 8%.
Operating profit growth was even stronger, up 20% to GBP29.6m
(2021: GBP24.7m), with net costs up 9%. Cash conversion was robust
at 102% and we finished the period with net cash of GBP18.7m, after
paying dividends of GBP22.5m and spending GBP5.6m on the purchase
of our own shares.
Total Contract Value ("TCV") grew 7% in the year to GBP143m
(2021: GBP133m) and we have a strong pipeline giving us confidence
in future growth.
We have continued to make good progress in diversifying our
customer base and increasing our recurring revenues. Our top 5
customers contributed 35% of our revenues in 2022, compared with
37% in 2021, 48% in 2020 and 61% in 2019. We had 17 customers
contributing revenues of more than GBP2m in the period, up from 14
in 2021, 10 in 2020 and 7 in 2019. 75% of our revenues are
recurring in nature.
Recruitment picked up towards the end of the first half and into
the second half, after a slower than planned hiring start to the
year in a tight labour market. At 31 December 2022 we had a
headcount of 441 (2021: 382) up 15%. Average headcount in the
period of 420 (2021: 383) was a 10% increase on last year. Our
strong pipeline and high level of recurring services revenues
enabled us to remain chargeable throughout the year. Our team
retention remained high at 90% (2021: 87%) for the year. Also
pleasing was our employee engagement, which is now at 84%, a record
level.
Strategic progress
Alfa is a leading asset and automotive finance software company
with global scale. Our platform, Alfa Systems, is class-leading
asset and automotive finance software supporting some of the
world's largest and most innovative companies, some of whom have
been with us for over 30 years, migrating in recent years onto our
modern v5 version of the software.
We provide market-leading software to a huge and diverse end
market. Our opportunity to grow market share is enormous.
Our vision is to grow our company size naturally, but grow our
impact rapidly - always retaining our underlying culture. Key to
this is delivering more concurrent implementations of our
world-class Alfa Systems more efficiently. We will have a big
company impact, but a small company feel.
We have continued to make good progress in 2022, with the key
achievements highlighted below.
Strong growth in Subscription
Subscription revenues are recurring in nature and arise from
subscriptions for our software, cloud hosting and maintenance
services.
Subscription revenues continued to grow strongly in the period,
up 17% and now contributing 29% of our revenues.
We have a Cloud Hosting first, subscription-led approach to
sales. Cloud Hosting gives us benefits in the speed of
implementation for our customers as well as the reliability and
flexibility of the service. Our hosting service also provides
built-in tools, including automated monitoring, patching and
scheduling. We anticipate that the majority of new customers will
choose a hosted service with licence and maintenance added into
their subscription. We have thirteen customers using Alfa Cloud
Hosting.
At Alfa, we pride ourselves on the security and rigour of our
development, deployment and management processes, particularly in
our Alfa Cloud Hosting service. Our customers are able to rely on
our ISO 27001, ISO 27018 and SSAE18 SOC 2 Type II certifications
and reports to maintain their confidence in our offerings. In 2022,
we added SSAE18 SOC 1 to our audit schedule, and can now offer a
SOC 1 Type I report to our hosting customers. This provides
customers and their financial auditors with an even greater level
of confidence in our services as well as easing their own audit
burden. During the year we have continued to build skills and
capacity in our Information Security team to ensure that we
continue to maintain the highest standards of security.
Developing our industry leading Software
Software revenues arise from the sale of perpetual licences and
development work for new and existing customers.
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 believe we have the industry leading software, due to
the functionality, capability and usability that has been developed
over many years along with the modern technology it is based on. We
continue to invest to maintain that lead.
In the year we again achieved a record number of deliveries,
with twenty-eight upgrades or new customer go-lives.
We release an upgrade every four weeks and periodically we
release a major new version of Alfa Systems with step change
functional and technical advancement. In Q3 2022 we released
version 5.7. This included an updated user interface with
improvements to our already best in class user experience and
enhanced credit decisioning capability. Version 5.7 also improved
Alfa's ability to manage configuration for multiple jurisdictions
and white-label relationships in a single instance, consolidating
our leading position in multi-country, multi-channel
implementations. In addition, this release has added functionality
for allocating revenues across individual assets which is
particularly important for equipment lessors, and also for billing
arrangements unrelated to assets which adds to Alfa's already
extensive support for financial product innovation.
We have strengthened our Markets and Products team, which uses
in-house expertise as well as feedback from customers and the wider
market to plan our roadmap for further investment in our
software.
In 2022 we announced a partnership with Tomorrow's Journey to
create the only end-to-end enterprise solution for subscription and
usage-based mobility. This is the first of what we anticipate will
be many ecosystem partnerships for Alfa Systems.
Overall software revenue was up 20% on last year. Development
days, including those upgrading from older versions of Alfa Systems
to v5, were strongly up on last year. We are particularly happy
when an existing Alfa customer upgrades an older version of Alfa to
Alfa Systems v5. This shows the strength of customer belief in
Alfa.
High quality Services and growing partnerships
Services revenues arise mainly from a regular stream of
non-development work we do for existing customers and also work on
implementations for new customers.
Overall Services revenues were up 8% on the prior period. We
have continued to deliver a very high level of work to both new and
existing customers. Of the Services revenues, 68% were with
existing customers, adding to ongoing recurring revenues.
We had two customers successfully go live in the year, both of
which were minimum viable product go-lives leveraging Alfa Start as
an accelerator. We also started work on a first implementation in
Mexico for an existing customer.
As we continue to execute our strategy and move towards a higher
level of operational gearing and efficiency in our business, a
greater proportion of our time was spent on software development
which has contributed to increasing Software revenues.
Increasing our access to skilled delivery partners is a key
element of our strategy for increasing the number of
implementations we can deliver. In the period we have continued to
make strong progress with a 58% increase in partner chargeable days
over the same period last year. In Europe we added ITDS, as an
augmentation partner to our already successful partner programme.
We also made good progress in the year with US partnering,
alongside continuing to expand our existing European partner
programme. We are supporting one of our European partners in
setting up in the US and we have signed a partnering agreement with
a new US partner. Work commenced with our new US partner at the end
of 2022.
Alfa iQ - building products
We continue to work through a variety of use cases with new and
existing clients where advanced machine learning techniques can
provide value and positively impact our customers' financial
performance. With our first paying customers announced in Q1 2022,
we have now built the foundation of our credit scoring solutions
with tooling for decisioning, training, analytics and
explainability ready for deployment.
Strong engagement with our people
We continue to focus on recruiting and retaining the best people
in our industries, and so we were delighted to be awarded Investors
in People Gold status. We were also ranked the highest rated listed
company and the highest rated software company in Newsweek's UK
Most Loved Workplaces. This reflected our own internal surveys
where we achieved a record score for employee engagement.
Our team charters, developed collaboratively by individual
teams, have been successfully implemented and new smart working
patterns have been established. These have evolved as the year has
progressed with an increase in in-person internal meetings across
the business which has greatly helped to strengthen our people
connections, particularly with those who have been recruited since
the lockdown. We see the benefits of hybrid working, balancing
in-person collaboration with more flexible working patterns for our
teams continuing into the future and this has enabled us to assign
the lease on one floor of our London office to reduce our ongoing
costs.
We have made good progress with our smart hub in Portugal. We
expect to be able to extend this model to other locations in the
future to give us access to talent pools outside our principal
engineering centre in London which will help mitigate the impact of
the increasing cost of acquiring development skills.
Capital return - GBP100m returned to shareholders through
dividends since IPO
We remain a strongly cash generative business and continue to
generate more cash than we need for our growth plans. We employ
three mechanisms for returning this excess cash to shareholders.
Firstly, we have a regular dividend, which we intend to grow
progressively as our profits grow, in line with our stated dividend
policy. We paid the 2021 final dividend of 1.1p or GBP3.3m in June
2022. Secondly, we have a share buyback programme that we launched
in January 2022. We bought 2.8m shares at an aggregate cost of
GBP4.7m in the year. Finally, we return any excess cash after
funding the regular dividend and the share buyback programme
through special dividends.
In 2022 we paid total dividends of 7.6p per share or GBP22.5m.
Even after these dividends and the share buyback programme, we
finished the period with a strong balance sheet with net cash of
GBP18.7m, and we expect further strong cash generation in 2023. As
a consequence, the Board is proposing a final dividend of 1.2 pence
per share, 9% up on last year (2021: 1.1 pence per share), with an
ex-dividend date of 25 May 2023, a record date of 26 May 2023 and a
payment date of 26 June 2023. In addition, the Board has decided to
declare a special dividend of 1.5 pence per share, with an
ex-dividend date of 13 April 2023, a record date of 14 April 2023
and a payment date of 9 May 2023. Together these dividends will
amount to a total payment of cGBP8.0m, which in aggregate will take
total dividends as a public company to cGBP108m.
Steady market conditions
The macro-economic outlook is uncertain at the moment. Alfa
Systems software is now operational in 37 countries; across
automotive finance, equipment finance, wholesale finance and
commercial lending markets; for OEMs, banks and independents; and
across all asset classes. The breadth and diversity of Alfa's
business interests help to insulate us from uncertainty in
individual geographies and sectors of our target market.
Along with Alfa's operating diversity providing insulation
against the current uncertainty, the market itself provides
protection. The asset and automotive 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.
In addition, the need for software is not associated with new
business alone, large players in our market will have significant
extant portfolios to manage whether they are writing new business
or not and these portfolios will be subject to the same drivers of
technical change as growing businesses. Regulatory change,
digitalisation and the growing need for flexibility continue to
drive customers to review their systems, particularly those still
running on legacy platforms, and they will continue to select
flexible modern systems.
The asset and automotive finance software market remains robust
and demand for technology modernisation continues. With our
functional, flexible, modern, cloud-native system, we are extremely
well positioned to capitalise on that demand.
Strong pipeline
With market drivers and the competitive landscape pushing
customers to review their systems, we remain confident in our
ability to demonstrate the strength, flexibility and modernity of
our own software as well as the quality of our people. We have a
strong late-stage pipeline and we remain confident in our ability
to convert most of these into wins. We also continue to see
activity coming into the early-stage pipeline which gives us the
confidence that our target markets remain robust at this time.
These prospects are additive to our TCV and will provide additional
support for our revenues in 2023 and 2024.
Outlook
We have delivered an excellent financial and operational
performance in 2022. This performance alongside the strategic
progress we have made, the confidence we have in the quality of our
people, the strength of the intellectual property in our software
and our late-stage pipeline give us great confidence in Alfa's
prospects for 2023 and beyond.
FINANCIAL REVIEW
Financial Results
Movement
GBPm 2022 2021 %
----------------------- ------ ------ ---------
Revenue 93.3 83.2 12%
Operating profit 29.6 24.7 20%
----------------------- ------ ------ ---------
Profit before tax 28.9 23.8 21%
----------------------- ------ ------ ---------
Taxation (4.4) (4.6) (4)%
----------------------- ------ ------ ---------
Profit for the period 24.5 19.2 28%
----------------------- ------ ------ ---------
Basic EPS 8.24p 6.49p 27%
----------------------- ------ ------ ---------
Diluted EPS 8.09p 6.39p 27%
----------------------- ------ ------ ---------
Revenues increased by 12% or GBP10.1m to GBP93.3m in the twelve
months ended 31 December 2022 (2021: GBP83.2m). Growth at constant
currency was 8%.
Operating profit increased by GBP4.9m to GBP29.6m (2021:
GBP24.7m), due to the GBP10.1m increase in revenues, partially
offset by GBP5.2m increase in expenses, principally due to a
GBP5.7m increase in staff and partner employment costs. This
included salary costs up 11% with average headcount up 10% along
with GBP1.0m increase in partner costs. This was partially offset
by a gain on a lease assignment of GBP0.6m and transaction FX gains
of GBP1.1m.
Net finance costs which relate to lease expenses of GBP0.6m
(2021: GBP0.8m) resulted in profit before tax of GBP28.9m (2021:
GBP23.8m). The Effective Tax Rate ("ETR") for 2022 is 15.2% (2021:
19.3%) due to some favourable prior year items, including R&D
tax credits. The resulting profit for the period was GBP24.5m
(2021: GBP19.2m).
Revenue
Revenue - by type 2022 2021 Movement
GBPm %
------------------- ----- ----- ---------
Subscription 27.4 23.5 17%
Software 16.3 13.6 20%
Services 49.6 46.1 8%
------------------- ----- ----- ---------
Total revenue 93.3 83.2 12%
------------------- ----- ----- ---------
Subscription revenues
Overall Subscription revenues increased 17% to GBP27.4m (2021:
GBP23.5m). The increase was driven by a 15% increase in maintenance
revenues boosted by a 28% increase in hosting revenues, principally
due to v4 customers moving onto hosting for their v5
implementations, along with two new customers, one which has gone
live and one which is in the implementation phase.
Software revenues
Software revenues of GBP16.3m were up GBP2.7m or 20% on last
year (2021: GBP13.6m) on the back of strong development revenues
for both existing and new customers, which were up 64% on last
year. In 2022 we saw a continuation of upgrades to v5 from older
versions of the software, which generally do not attract additional
licence payments, except where customers purchase additional
modules. Customised licence revenues were up 13% on last year due
to the extra development days. One-off licence fees in the year
were GBP0.4m; down GBP1.7m on the GBP2.1m in 2021.
Services revenues
Services revenues increased overall by 8% to GBP49.6m (2021:
GBP46.1m) at actual exchange rates. Implementation revenues for new
customers were down 16% as more of our team was focused on work for
v5 upgrades. As a consequence, we saw services work for existing
customers increase by 25%. The ongoing services work for existing
customers, including v5 upgrades, was 68% of overall services
revenue in the year.
Total Contract Value (TCV)
TCV - by stream
GBPm Movement
2022 2021 %
----------------- ------ ------ ---------
Subscription 93.3 85.8 9%
Software 20.1 14.9 35%
Services 29.5 32.4 (9)%
-------------------- ------ ------ ---------
Total TCV 142.9 133.1 7%
-------------------- ------ ------ ---------
Total contract value (TCV) increased over last year by 7% to
GBP142.9m reflecting net new contracts signed in the year.
Subscription TCV has increased 9% driven by an increase in the
number of customers and the significant growth in our hosting
business. There was also a 35% increase in Software TCV,
principally from an increase in contracted development work.
Services TCV of GBP29.5m was down 9% versus this time last year due
to the timing of the signing of statements of work.
TCV - by type for next 12 months
GBPm Movement
2022 2021 %
--------------- ----- ----- ---------
Subscription 30.1 26.9 12%
Software 10.2 6.7 52%
Services 24.7 26.2 (6)%
------------------ ----- ----- ---------
Total TCV 65.0 59.8 9%
------------------ ----- ----- ---------
Of the TCV at 31 December 2022, GBP65.0m (31 Dec 2021: GBP59.8m)
is anticipated to convert into revenue within the next 12 months,
assuming contracts continue as expected and are not cancelled or
delayed. This includes GBP10.2m (2021: GBP6.7m) of Software
revenues, GBP30.1m (2021: GBP26.9m) of Subscription revenues and
GBP24.7m (2021: GBP26.2m) of Services revenues.
Operating profit
The Group's operating profit increased strongly, up by 20% or
GBP4.9m, to GBP29.6m (2021: GBP24.7m) primarily reflecting the
GBP10.1m increase in revenues, partially offset by an increase in
the Group's cost base as we continued to invest in the business,
and through increased headcount and partner costs.
Headcount numbers were up 15% in 2022 at 441 (2021: 382),
however following the slower recruitment at the start of the year
average headcount was up 10% to 420 (2021: 383). Our staff
retention rate in 2022 was strong at 90% (2021: 87%).
Expenses - net 2022 2021 Movement
GBPm %
----------------------------------- ------ ------ ---------
Cost of sales 33.4 29.0 15%
Sales, general and administrative
expenses 31.0 30.0 3%
Other income (0.7) (0.5) 40%
----------------------------------- ------ ------ ---------
Total expenses - net 63.7 58.5 9%
----------------------------------- ------ ------ ---------
Cost of sales increased by GBP4.4m to GBP33.4m (2021: GBP29.0m)
due to the growth in the business with higher salary costs from the
increase in customer facing headcount along with increased hosting
costs and partner costs where days were up 41% over last year.
Sales, general and administrative (SG&A) expenses increased
by GBP1.0m to GBP31.0m in the year (2021: GBP30.0m). This included
increased salary costs through higher headcount. In addition Profit
Share Pay increased to GBP3.5m (2021: GBP3.1m) and share-based
payment charges increased to GBP1.8m (2021: GBP1.5m). Travel and
conference costs were up GBP0.9m versus prior year, due to a
pick-up in travel in the second half as activity started to return
post Covid lockdowns.
Two gains, totalling GBP1.6m offset the increases noted above.
Firstly, a gain of GBP0.5m on a lease assignment. A lasting impact
of Covid has been the introduction of our smart working policy
which prompted a review of the space that we need in our London
office. We concluded that we did not need all the space, and so we
assigned the remaining part of the lease on one floor, which
crystalised a book gain as the related lease liability was in
excess of the right to use asset value. There has also been a
favourable increase in foreign currency differences of GBP1.3m,
which moved from a loss of GBP0.2m in 2021 to a gain of GBP1.1m in
2022.
Finance costs
Net finance costs which relate to leases of GBP0.6m (2021:
GBP0.8m) reduced slightly due to the assignment of part of the
London office space noted above. The Group has no external bank
borrowings.
Profit for the period
Profit after taxation increased by GBP5.3m, or 28%, to GBP24.5m
in 2022 (2021: GBP19.2m). The Effective Tax Rate ("ETR") for 2022
is 15.2% (2021: 19.3%), which benefited from GBP1.3m of prior year
items, with the major component of this being due to R&D tax
credits.
Earnings per share
Basic earnings per share increased by 27% to 8.24 pence in 2022
(2021: 6.49 pence). Diluted earnings per share also increased by
27% to 8.09 pence (2021: 6.39 pence).
Cash flow
Cash (including the effect of exchange rate changes) decreased
by GBP4.4m to GBP18.7m at 31 December 2022, from GBP23.1m at 31
December 2021. This decrease has been driven by strong cash
generation from operations, offset by the payment of special and
regular dividends of GBP22.5m (2021: GBP32.7m) and purchases of own
shares for the Employee Benefit Trust and through the share buyback
programme of GBP5.6m (2021: GBP4.6m).
Operating free cash flow
conversion
GBPm 2022 2021
----------------------------------- ------ ------
Cash generated from operations 34.0 31.3
Adjusted for:
Capital expenditure (2.3) (1.3)
Principal element of the
lease payments in respect
of IFRS 16 (1.6) (1.9)
----------------------------------- ------ ------
Operating free cash flow 30.1 28.1
----------------------------------- ------ ------
Operating profit 29.6 24.7
----------------------------------- ------ ------
Operating free cash flow
conversion 102% 114%
----------------------------------- ------ ------
The Group's Operating Free Cash Flow Conversion (FCF) of 102%
(2021: 114%) was below the very strong performance last year and
closer to our 100% conversion expectation as we move to a
subscription model.
In addition to the cash generated from operations of GBP34.0m,
the Group incurred GBP2.3m on capital expenditure (2021: GBP1.3m)
and made net tax payments of GBP6.2m (2021: GBP3.8m). Tax payments
increased on last year as we moved into the HMRC large company tax
category, with all estimated tax paid within the year.
In the year, net cash outflows of GBP29.7m (2021: GBP39.2m) from
financing activities related to the principal element of lease
payments of GBP1.6m (2021: GBP1.9m) and purchase of own shares of
GBP5.6m (2021: GBP4.6m). The biggest cash outflow related to
dividends, with ordinary dividends of GBP3.3m (2021: GBP3.0m) paid
in year along with Special Dividends of GBP19.2m (2021: GBP29.7m).
Since November 2020, total dividends of GBP100m have been paid.
Balance sheet
In the year the two significant movements in the balance sheet
have been the movement in cash explained above, and a reduction in
the lease assets of GBP7.3m and lease liabilities of GBP7.8m
principally due to assigning a lease on one floor of the London
office.
Other balance sheet movements were as follows:
Current assets at year end were GBP39.0m (2021: GBP39.6m). Trade
receivables grew on the back of the growth in the business to
GBP8.9m (2021: GBP6.0m) however they continue to remain well
controlled with total receivables of only GBP0.1m (2021: GBP0.7m)
more than 30 days overdue. Provision for impairment remains nil
(2021: GBPnil).
Accrued income increased slightly in the year to GBP6.5m (2021:
GBP6.3m) with prepayments increasing to GBP4.5m (2021: GBP3.2m) due
to the inclusion of deferred costs (offset by a related increase in
deferred licence contract liabilities).
Current liabilities of GBP25.6m (2021: GBP24.0m) were up
GBP1.6m. Trade payables and other payables were largely unchanged
at GBP9.5m (2021: GBP9.3m). Contract liabilities increased by
GBP3.8m to GBP14.8m (2021: GBP11.0m) with deferred licence
liabilities increasing GBP3.3m to GBP8.6m (2021: GBP5.3m) due to an
increase in the material right related to customised licence
implementations, along with an increase in deferred maintenance
liabilities up GBP0.5m to GBP6.2m (2021: GBP5.7m) from growth in
the business.
Non-current liabilities reduced significantly, down GBP7.7m to
GBP8.9m (2021: GBP16.6m) due to a reduction in lease liabilities to
GBP8.0m (2021: GBP15.2m) with provisions decreasing to GBP0.9m
(2021: GBP1.4m).
Capital allocation and distributions
The Group has had strong cash generation over a number of years
and we expect this to continue. The Group's capital allocation
policy takes into consideration the need to continue to invest in
our people and technology whilst maintaining strong liquidity at
the same time.
The first post IPO dividends were paid in November 2020 and in
January 2022 we also announced a share buyback programme of up to
GBP18m over the following 18 months.
The Board intends to progressively increase the ordinary
dividend as the Group grows, whilst ensuring that we retain a
strong balance sheet.
For 2022 we are proposing a dividend of 1.2 pence per share,
amounting to GBP3.6m with an ex-dividend date of 25 May 2023. In
addition we have declared a special dividend of 1.5 pence per share
amounting to cGBP4.4m with an ex-dividend date of 13 April
2023.
Related parties
Details about related party transactions are disclosed in note
32.
Going concern
The 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 reasonably possible changes in
trading performance, show that the Group has sufficient cash
reserves to continue to operate for a period of not less than 12
months from the date of approval of these financial statements. The
going concern assessment 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, whilst it is
acknowledged that there is continued uncertainty over future
economic conditions, the Directors consider it appropriate to
continue to adopt the going concern basis of accounting in
preparing the financial statements.
Subsequent events
There have been no reportable subsequent events since the
balance sheet date, other than the continuation of the share
buyback programme.
Duncan Magrath
Chief Financial Officer
1 March 2023
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 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 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:
GBPm 2022 2021
------------------------------------- ------ ------
Cash generated from operations 34.0 31.3
Capital expenditure (2.3) (1.3)
Principal element of lease payments (1.6) (1.9)
------------------------------------- ------ ------
Operating FCF generated 30.1 28.1
Operating profit 29.6 24.7
------------------------------------- ------ ------
Operating FCF Conversion 102% 114%
------------------------------------- ------ ------
Total contracted value (TCV)
Total contracted value ("TCV") - TCV is calculated by analysing
future contracted 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).
(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 H2 2022 H1 2022 H2 2021
----------------------------- -------- -------- --------
USD 1.25 1.30 1.38
Euro 1.18 1.16 1.17
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE
INCOME
GBPm Note 2022 2021
------------------------------------------- ---- ------ ------
Continuing operations
Revenue 5 93.3 83.2
Cost of sales (33.4) (29.0)
Gross profit 59.9 54.2
Sales, general and administrative expenses (31.0) (30.0)
Other income 0.7 0.5
------------------------------------------- ---- ------ ------
Operating profit 6 29.6 24.7
------------------------------------------- ---- ------ ------
Share of net loss of joint venture 19 (0.1) (0.1)
Profit before net finance costs and tax 29.5 24.6
Finance income 10 - -
Finance expense 10 (0.6) (0.8)
Profit before taxation 28.9 23.8
Taxation 11 (4.4) (4.6)
------------------------------------------- ---- ------ ------
Profit for the financial year 24.5 19.2
------------------------------------------- ---- ------ ------
Other comprehensive income:
Items that may be reclassified to profit
or loss:
Exchange differences on translation of
foreign operations 27 0.4 (0.1)
Other comprehensive income/(loss) net
of tax 0.4 (0.1)
------------------------------------------- ---- ------ ------
Total comprehensive income for the year 24.9 19.1
------------------------------------------- ---- ------ ------
Earnings per share (in pence) for profit
attributable
to the ordinary equity holders of the
Company
Basic 12 8.24 6.49
Diluted 12 8.09 6.39
------------------------------------------- ---- ------ ------
The above consolidated statement of profit or loss and
comprehensive income should be read in conjunction with the
accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
GBPm Note 2022 2021
--------------------------------- ---- ----- -----
Assets
Non-current assets
Goodwill 14 24.7 24.7
Other intangible assets 15 2.9 2.4
Property, plant and equipment 16 1.0 0.8
Right-of-use assets 17 7.1 14.4
Deferred tax assets 18 1.6 1.8
Interests in joint venture 19 0.2 0.3
--------------------------------- ---- ----- -----
Total non-current assets 37.5 44.4
--------------------------------- ---- ----- -----
Current assets
Trade receivables 20 8.9 6.0
Accrued income 21 6.5 6.3
Prepayments 21 4.5 3.2
Other receivables 21 0.2 1.0
Corporation tax recoverable 21 0.2 -
Cash and cash equivalents 22 18.7 23.1
Total current assets 39.0 39.6
--------------------------------- ---- ----- -----
Total assets 76.5 84.0
--------------------------------- ---- ----- -----
Liabilities and equity
Current liabilities
Trade and other payables 23 9.5 9.3
Corporation tax 23 - 1.8
Lease liabilities 24 1.3 1.9
Contract liabilities 23 14.8 11.0
--------------------------------- ---- ----- -----
Total current liabilities 25.6 24.0
--------------------------------- ---- ----- -----
Non-current liabilities
Lease liabilities 24 8.0 15.2
Provisions for other liabilities 25 0.9 1.4
--------------------------------- ---- ----- -----
Total non-current liabilities 8.9 16.6
--------------------------------- ---- ----- -----
Total liabilities 34.5 40.6
--------------------------------- ---- ----- -----
Capital and reserves
Share capital 26 0.3 0.3
Translation reserve 27 0.4 -
Own shares 28 (7.5) (3.4)
Retained earnings 48.8 46.5
--------------------------------- ---- ----- -----
Total equity 42.0 43.4
--------------------------------- ---- ----- -----
Total liabilities and equity 76.5 84.0
--------------------------------- ---- ----- -----
The above consolidated statement of financial position should be
read in conjunction with the accompanying notes.
Andrew Denton (Chief Executive Officer) Duncan Magrath (Chief
Financial Officer)
Alfa Financial Software Holdings PLC - Registered number 10713517
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
attributable
to owners
Share Own Translation Retained of the
GBPm Note capital shares reserve earnings parent
------------------------------ ---- -------- ------- ----------- --------- -------------
Balance as at 1 January
2021 0.3 - 0.1 59.8 60.2
------------------------------ ---- -------- ------- ----------- --------- -------------
Profit for the financial
year - - - 19.2 19.2
Other comprehensive loss - - (0.1) - (0.1)
------------------------------ ---- -------- ------- ----------- --------- -------------
Total comprehensive income
for the year - - (0.1) 19.2 19.1
------------------------------ ---- -------- ------- ----------- --------- -------------
Transactions with owners
in their capacity as owners:
Equity-settled share-based
payment schemes 29 - - - 1.1 1.1
Equity-settled share-based
payment schemes - deferred
tax impact 18 - - - 0.3 0.3
Dividends 31 - - - (32.7) (32.7)
Own shares distributed 28 - 1.2 - (1.2) -
Own shares acquired 28 - (4.6) - - (4.6)
------------------------------ ---- -------- ------- ----------- --------- -------------
Balance as at 31 December
2021 0.3 (3.4) - 46.5 43.4
------------------------------ ---- -------- ------- ----------- --------- -------------
Profit for the financial
year - - - 24.5 24.5
Other comprehensive income - - 0.4 - 0.4
------------------------------ ---- -------- ------- ----------- --------- -------------
Total comprehensive income
for the year - - 0.4 24.5 24.9
------------------------------ ---- -------- ------- ----------- --------- -------------
Transactions with owners
in their capacity as owners:
Equity-settled share-based
payment schemes 29 - - - 1.5 1.5
Equity-settled share-based
payment schemes - deferred
tax impact 18 - - - 0.1 0.1
Dividends 31 - - - (22.5) (22.5)
Own shares distributed 28 - 1.5 - (1.3) 0.2
Own shares acquired 28 - (5.6) - - (5.6)
Balance as at 31 December
2022 0.3 (7.5) 0.4 48.8 42.0
------------------------------ ---- -------- ------- ----------- --------- -------------
The above consolidated statement of changes in equity should be
read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
GBPm Note 2022 2021
------------------------------------------------ ------- ------ ------
Cash flows from operating activities
Profit before tax 28.9 23.8
Net finance costs 0.6 0.8
Share of net loss from joint venture 0.1 0.1
------------------------------------------------ ------- ------ ------
Operating profit 29.6 24.7
------------------------------------------------ ------- ------ ------
Adjustments:
Depreciation 6/16/17 2.2 2.3
Amortisation 6/15 0.8 0.8
Share-based payment charge 29 1.8 1.5
Net gain on disposal of assets (0.3) -
Movement in provisions 25 (0.5) -
Movement in working capital:
Movement in contract liabilities 23 3.8 4.1
Movement in trade and other receivables 20/21 (3.6) (2.8)
Movement in trade and other payables (excluding
contract liabilities) 23 0.2 0.7
------------------------------------------------ ------- ------ ------
Cash generated from operations 34.0 31.3
------------------------------------------------ ------- ------ ------
Interest element on lease payments 10/24 (0.6) (0.8)
Income taxes paid (6.2) (3.8)
------------------------------------------------ ------- ------ ------
Net cash generated from operating activities 27.2 26.7
------------------------------------------------ ------- ------ ------
Cash flows from investing activities
Purchases of property, plant and equipment 16 (0.7) (0.3)
Purchases of computer software 15 (0.1) (0.1)
Payments for internally developed software 15 (1.5) (0.9)
------------------------------------------------ ------- ------ ------
Net cash used in investing activities (2.3) (1.3)
------------------------------------------------ ------- ------ ------
Cash flows from financing activities
Dividends paid to Company shareholders (22.5) (32.7)
Principal element on lease payments 24 (1.6) (1.9)
Purchase of own shares 28 (5.6) (4.6)
Cash used in financing activities (29.7) (39.2)
------------------------------------------------ ------- ------ ------
Net decrease in cash (4.8) (13.8)
Cash and cash equivalents at the beginning
of the year 22 23.1 37.0
Effect of foreign exchange rate changes
on cash and cash equivalents 0.4 (0.1)
------------------------------------------------ ------- ------ ------
Cash and cash equivalents at the end of
the year 22 18.7 23.1
------------------------------------------------ ------- ------ ------
The above consolidated statement of cash flows should be read in
conjunction with the accompanying notes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARED 31
DECEMBER 2022
1. Summary of significant accounting policies
This note provides a list of the significant accounting policies
adopted in the preparation of these consolidated financial
statements. These policies have been consistently applied to all
the years presented, unless otherwise stated. The financial
statements are for the Group, consisting of Alfa Financial Software
Holdings PLC (Alfa or the Company), its subsidiaries and joint
venture, and are presented to the nearest million unless otherwise
stated.
The principal activity of the Group is to provide software
solutions and consultancy services to the auto and equipment
finance industry in the United Kingdom, United States of America,
Europe and Australasia.
1.1 Basis of preparation
Statement of Compliance
The preliminary results for the year ended 31 December 2022 are
prepared in accordance with UK adopted International Accounting
Standards (IAS) and interpretations by the IFRS Interpretations
Committee applicable to companies reporting under UK adopted IFRS.
They do not include all the information required for full annual
statements and should be read in conjunction with the 2022 Annual
Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year
ended 31 December 2022.
The financial information has been extracted from the financial
statements for the year ended 31 December 2022, which have been
approved by the Board of Directors on 1 March 2023. They have been
reported on by the Group's auditors and will be delivered to the
Registrar of Companies in due course. The report of the auditors
was (i) unqualified,
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report, and (iii) did not contain a statement under section 498(2)
or (3) of the Companies Act 2006.
The comparative figures for the financial year 31 December 2021
have been extracted from the Group's statutory accounts for that
financial year. The Board of Directors approved the 2021 Group
financial statements on 8 March 2022, and they have been delivered
to the Registrar of Companies. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
The financial information contained in this announcement does
not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006.
Compliance with IFRS
The consolidated financial statements of the Group have been
prepared in accordance with UK-adopted international accounting
standards and Company Law.
Historical cost convention
The consolidated financial statements have been prepared under
the historical cost convention, other than the revaluation of
financial assets and financial liabilities recorded at fair value
through profit or loss.
Going concern
The 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 reasonably possible changes in
trading performance, show that the Group has sufficient cash
reserves to continue to operate for a period of not less than 12
months from the date of these financial statements.
The going concern assessment 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, whilst it is acknowledged that there is continued
uncertainty over future economic conditions, the Directors consider
it appropriate to continue to adopt the going concern basis of
accounting in preparing the financial statements.
New and amended standards adopted by the Group
In the current year, the Group has applied a number of
amendments to IFRS Accounting Standards issued by the International
Accounting Standards Board (IASB) that are mandatorily effective
for an accounting period that begins on or after 1 January 2022.
Their adoption has not had any material impact on the disclosures
or on the amounts reported in these financial statements. The
amendments relevant to the Group are:
Amendments to IFRS 3 Business Combinations; IAS 16 Property,
Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and
Contingent Assets; and Annual Improvements 2018-2020 (All issued 14
May 2020, effective from 1 January 2022).
New standards, amendments and interpretations not yet
adopted
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised IFRS Standards
that have been issued but are not yet effective:
-- Amendments to IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction;
-- Amendments to IAS 8 Accounting policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates;
-- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2 Disclosure of Accounting policies;
and
-- Amendments to IFRS 10 and IAS 28 - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture.
We are currently in the process of determining if the adoption
of the Standards listed above will have a material impact on the
financial statements of the Group.
1.2 Group structure
Basis of consolidation
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group.
Unless otherwise stated, subsidiaries have share capital
consisting solely of ordinary shares, and the proportion of
ownership interests held equals the voting rights held by the
Group. The country of incorporation or registration is also each
subsidiary's principal place of business.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation. All subsidiaries have a 31 December
year end.
The Group exercises control over the employee benefit trust
because it is exposed to, and has a right to, variable returns from
this trust and is able to use its power over the trust to affect
those returns. The trust is therefore consolidated by the
Group.
Joint arrangements
A joint arrangement is a contractual arrangement whereby the
Group and other parties undertake an economic activity that is
subject to joint control; that is, when the relevant activities
that significantly affect the investee's returns require the
unanimous consent of the parties sharing control.
Joint control is the contractually agreed sharing of control of
an arrangement, and exists only when decisions about the activities
that significantly affect the arrangement's returns require the
unanimous consent of the parties sharing control. Judgement is
required in determining this classification through an evaluation
of the facts and circumstances arising from each individual
arrangement. Joint arrangements are classified as either joint
operations or joint ventures based on the rights and obligations of
the parties to the arrangement. In joint operations, the parties
have rights to the assets and obligations for the liabilities
relating to the arrangement, whereas in joint ventures, the parties
have rights to the net assets of the arrangement.
Alfa only has one joint venture, namely Alfa iQ, which was
formed in May 2020. The investment in the joint venture is
accounted for using the equity method. The Group's share of the
joint venture's net profit/(loss) is based on its most recent
financial statement drawn up to the Group's balance sheet date. The
total carrying value of investment in the joint venture represents
the cost of the investment, including loans which form part of the
net investment in the joint venture, plus the share of
post-acquisition retained earnings and any other movements in
reserves less any impairment in the value of the investment.
The carrying values of joint ventures are reviewed on a regular
basis and if there is objective evidence that an impairment in
value has occurred as a result of one or more events during the
period, the investment is impaired. The Group's share of the joint
venture's losses in excess of its interest in that joint venture is
not recognised to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the joint
venture. Unrealised gains arising from transactions with joint
ventures are eliminated against the investment to the extent of the
Group's interest in the investee. Unrealised losses are eliminated
in the same way, but only to the extent that there is no evidence
of impairment.
Loans to the joint venture are measured at fair value on initial
recognition, and subsequently carried at amortised cost. Any
surplus between the nominal and fair value of the loan is
recognised as an investment in the joint venture.
1.3 Segment reporting
Operating and reporting segments are reported in a manner
consistent with the internal reporting provided to the Chief
Operating Decision Maker (CODM). The Group's Chief Executive
Officer (CEO), who is responsible for allocating resources and
assessing performance, has been identified as the CODM.
The CODM regularly reviews the Group's operating results in
order to assess performance and to allocate resources. The CODM
considers the business from a product perspective and, therefore,
recognises one operating and reporting segment, being the sale of
software and related services. The Group splits revenue by type of
activity but reports operating results on a consolidated basis, as
presented to the CODM, along with the required entity wide
disclosure.
The Group discloses revenue split by type of activity being
Subscription, Software and Services.
a. Subscription revenues include recurring revenues paid on a
monthly or annual basis, including subscription licence revenues,
maintenance and cloud hosting.
b. Software revenues include revenues from the recognition of
customised licence revenue, one-off licence fees and any
development revenues.
c. Services revenues are revenues from any work done for
customers including pre-implementation, implementation work, and
ongoing services, but excludes any revenue from development work
which is disclosed in Software.
See note 1.5 for details of our revenue recognition accounting
policy and note 2 for the critical accounting judgements and
estimates in relation to revenue recognition.
1.4 Foreign currency translation
Functional currency
Items included in the consolidated financial statements of each
of the Group's subsidiaries are measured using their functional
currency. The functional currency of the parent and each subsidiary
is the currency of the primary economic environment in which the
entity operates. See applicable exchange rates used in 2022 and
2021 below:
2022 2021
---------------- ----------------
Closing Average Closing Average
---- ------- ------- ------- -------
USD 1.21 1.24 1.35 1.38
EUR 1.13 1.17 1.19 1.16
NZD 1.90 1.95 1.98 1.95
AUD 1.77 1.78 1.86 1.83
---- ------- ------- ------- -------
Presentation currency
The consolidated financial statements are presented in pounds
sterling. Alfa's functional and presentation currency is pounds
sterling.
Group companies
The results and financial position of foreign operations (none
of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
- Assets and liabilities for each consolidated statement of
financial position presented are translated at the closing rate at
the date of that consolidated statement of financial position;
- Income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
dates of the transactions); and
- All resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities are
recognised in other comprehensive income. When a foreign operation
is sold the associated exchange differences are reclassified to
profit or loss, as part of the gain or loss on sale.
Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currencies using the exchange rates
prevailing at the dates of the transactions. Foreign exchange
differences arising from the settlement of such transactions and
from the translation at the reporting date of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss. See applicable exchange rates used by the Group
above.
1.5 Revenue recognition
The Group derives revenue by type of activity being
Subscription, Software and Services (as disclosed in note 1.3).
i Subscription revenue which includes the periodic rights to use
Alfa Systems, periodic maintenance, subscription (including cloud
hosting) and one-off revenue relating to catch-up periodic
maintenance;
ii Software revenue which includes development revenue (part of
the customised licence revenue), options over the right to use Alfa
Systems, and one-off licence fees; and
iii Services revenue which includes software implementation
services.
The Group provides the right to use, software development
services, core implementation services and ongoing support of its
product, Alfa Systems. The Group's contractual arrangements contain
multiple deliverables or services, such as the development or
customisation of the software to the customer's requirements,
implementation services such as migration of data and testing and
certain project management services.
Alfa assesses whether there are distinct performance obligations
at the start of each contract and throughout the performance of the
implementation, development and services projects and maintenance
period. These performance obligations are laid out below. Any one
contract may include a single performance obligation or a
combination of those listed below:
1.5.1 Software implementation services
Where implementation services are considered to be distinct,
i.e. when relatively straightforward, do not require additional
development services and could be performed by an external third
party, the implementation services are accounted for as a separate
performance obligation from any development services.
When a customer is in the process of implementing the software,
the transaction price is allocated to this based on the stand-alone
selling prices (derived from standard day rates) and is recognised
over time based on the effort incurred, limited to the amount to
which Alfa has a right to payment. Over time recognition is
considered appropriate as customers simultaneously receive and
consume the benefits provided. For customers under the Group's
subscription based contracts that are undergoing implementation,
revenue for software implementation services is deemed to be
distinct from any other performance obligation and is recognised
based on a percentage of completion basis.
When the type of services provided are ongoing services, the
transaction price is deemed to be the actual day rate, and revenue
is recognised at a point in time as the service is provided.
1.5.2 Development services and licence services (the customised licence)
Another performance obligation is the granting of a right to use
Alfa Systems, which includes the delivery of the related software
licence and any development efforts which change the underlying
code.
During the initial phase of implementing the software, the total
revenue attributable to this performance obligation is estimated at
the outset of the relevant software implementation project and
recognised as the effort is expended, on a percentage-of-completion
basis, limited to the amount of revenue to which Alfa has the right
to payment. See note 5.6 for the accounting policy for variable
consideration. A percentage-of-completion basis has been used
because customers obtain the ability to benefit from the product
from the start of the implementation project, the development or
customisation of the asset is tailored to the customer's specific
requirements; and the customer is entitled to the benefits of the
efforts as at the date the efforts are delivered, so recognition
over time is appropriate.
Revenue attributable to development services is valued using the
residual value method as there are no stand-alone selling prices
which are observable as each project is customised. For customers
under the Group's subscription based contracts that are undergoing
implementation, revenue for development services is deemed to be
distinct from any other performance obligation and is recognised
based on a percentage of completion basis.
Once the customer is already using the software and the services
provided are ongoing development, the transaction price is deemed
to be the actual day rate and revenue is recognised at a point in
time as the development service is provided.
1.5.3 Option over the right to use Alfa Systems
In the event that customers have to pay periodic maintenance
fees in order to keep using Alfa Systems, a component of these
future maintenance fees is attributable to the right to use the
software. In these circumstances the licence granted by Alfa is
considered to renew in future periods. There may be a material
right in respect of discounts in future periods. In order to
ascribe a value to this option, management annualise the value of
the customised licence performance obligation and compare it to the
annual right to use software performance obligation post go
live.
The value of this option is built up from the start of the
implementation project in line with the percentage-of-completion of
development revenue described in 1.5.2 above. Following the
completion of the implementation project, the value of this option
is recognised evenly over the expected remaining customer life.
1.5.4 Periodic right to use Alfa Systems
When a customer pays its maintenance fee annually, this
performance obligation represents the proportion of this fee which
relates to the periodic option to renew the right to use Alfa
Systems. If there is the right of clawback of the annual right to
use, such amounts are recognised throughout the annual period. If
there is no right of clawback, then the annual right to use amount
is recognised in full when there is a right of collection.
When a customer pays for its maintenance fee as part of a
subscription contract (see section 1.5.6 below), it will not be
treated as a separate performance obligation (and will instead be
part of the subscription amount).
1.5.5 Periodic maintenance amounts
This represents the stand-alone selling price of the ongoing
support or maintenance of Alfa Systems which is recognised
throughout the period over which the services are delivered.
1.5.6 Subscription amounts
Certain of the Group's implementation and service contracts
include a subscription payment mechanism. This represents a monthly
fee charged to the customer covering one or more of the following
performance obligations; the provision of monthly hosting services;
the monthly periodic right to use Alfa Systems and the provision of
monthly maintenance services (when this becomes applicable to the
customer). The monthly payments are recognised as revenue in the
period to which they relate. This reflects the underlying
performance obligations of the Group and termination rights of the
customer.
1.5.7 One-off revenue amounts
From time to time, the Group is entitled to receive one-off
licence revenue from its customers as they increase the number of
contracts on their version of Alfa Systems. Additionally, there are
times when catch-up periodic maintenance amounts are entitled to be
received by the Group, also as a result of the increased number of
contracts. Generally this revenue is recognised at the point in
time it is invoiced, or becomes contractually payable, reflecting
the fact that the Group has no remaining performance obligations to
satisfy.
Capitalised sales incentive costs
The Group incentivises its sales force for securing sales. In
line with IFRS 15, these costs are capitalised and are amortised in
line with the percentage of completion of the software
implementation project.
Costs to fulfil contracts
The Group has recognised an asset in relation to employee costs
to fulfil its long-term development contracts (as disclosed in note
21). These costs relate directly to the contracts, generate or
enhance resources to be used to satisfy performance obligations in
the future and are expected to be recovered. This asset is
presented within prepayments in the Statement of Financial
Position. These costs are amortised within cost of sales in line
with the percentage of completion of the development project.
1.6 Operating expenses
Operating expenses include items such as personnel costs
(including training and recruitment), cost of software not
capitalised, research and development costs and other
infrastructure expenses. These items have been grouped into the
following categories for disclosure purposes:
Cost of sales - This includes salaries and other direct costs
associated with satisfying customer contracts and for developing
software.
Sales, general and administrative expenses - This includes all
the residual operating costs.
1.7 Income tax
Taxation expense for the year comprises current and deferred tax
recognised in the reporting period. Tax is recognised in profit and
loss, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. Current or
deferred taxation assets and liabilities are not discounted.
Current tax
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the reporting date in
the countries where the Group and its subsidiaries operate and
generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the Group's
consolidated financial statements. However, the deferred income tax
is not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or
substantively enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profits will be available against
which the temporary differences can be utilised. Deferred income
tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes, assets and
liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
1.8 Leases
Alfa enters into lease contracts in respect of various
properties and motor vehicles. These rental contracts are typically
made for fixed periods of 2 to 10 years, and sometimes have
extension options. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions.
In accordance with IFRS 16, leases are recognised as a right-of-use
asset with a corresponding liability, at the date at which the
leased asset is available for use by Alfa. These assets and
liabilities are initially measured on a present value basis (as set
out in more detail below), with each subsequent lease payment
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated
over the shorter of the asset's useful life and the lease term on a
straight-line basis.
Alfa assesses whether a contract is, or contains a lease, at
inception of the contract. The Group recognises a right -- of --
use asset and a corresponding lease liability, with respect to all
lease arrangements in which it is the lessee, except for short --
term leases (defined as leases with a lease term of 12 months, or
fewer) and leases of low-value assets. For these leases, the Group
recognises the lease payments as an expense on a straight -- line
basis over the term of the lease, unless another systematic basis
is more representative of the time pattern in which economic
benefits from the leased assets are consumed.
Lease liabilities
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate.
- Lease payments included in the measurement of the lease liability comprise:
- Fixed lease payments (including in substance fixed payments), less any lease incentives;
- Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
- The amount expected to be payable by the lessee under residual value guarantees;
- The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
- Penalties for terminating the lease, if the lease term
reflects the exercise of an option to terminate the lease.
The lease liability is presented in separate lines, split
between current and non-current liabilities, in the consolidated
statement of financial position. It is subsequently measured by
increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made.
The Group re-measures the lease liability (and makes a
corresponding adjustment to the related right -- of -- use asset)
whenever:
- The lease term has changed, or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is re-measured by discounting the revised lease
payments using a revised discount rate;
- The lease payments change due to changes in an index, or rate,
or a change in expected payment under a guaranteed residual value.
In these cases, the lease liability is re-measured by discounting
the revised lease payments, using the initial discount rate (unless
the lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used); and
- A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is re-measured by discounting the revised lease payments
using a revised discount rate.
Right-of-use assets
The right -- of -- use assets comprise:
- The initial measurement of the corresponding lease liability;
- Lease payments made at, or before, the commencement day;
- Any initial direct costs; and
- Restoration cost.
The right -- of -- use assets are presented as a separate line
in the consolidated statement of financial position.
The right-of-use assets are subsequently measured at cost less
accumulated depreciation and impairment losses (if applicable).
They are depreciated from the commencement date of the lease and
over the shorter period of the lease term and useful life of the
underlying asset. If a lease transfers ownership of the underlying
asset, or the cost of the right -- of -- use asset reflects an
expectation that the Group will exercise a purchase option, the
related right -- of -- use asset is depreciated over the useful
life of the underlying asset. Currently, the Group does not have
any leases that include a purchase option, or transfer ownership of
the underlying asset.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located,
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under IAS 37.
Extension options (or periods after termination options) are
only included in the lease term if the lease is reasonably certain
to be extended (or not terminated). The assessment is reviewed if a
significant event or a significant change in circumstances occurs
which affects this assessment and that is within the control of the
lessee. During the current financial period, there have been no
changes in such assessments.
Variable rents that do not depend on an index, or rate, are not
included in the measurement of the lease liability and the right --
of -- use asset. The related payments are recognised as an expense
in the period in which the event or condition that triggers those
payments occurs and are included as an expense in the consolidated
statement of profit or loss and comprehensive income.
1.9 Impairment of non-financial assets
Goodwill is tested annually for impairment. The carrying amount
is allocated to the cash-generating unit (CGU) that is expected to
benefit from investment and which represents the lowest level at
which the goodwill is monitored for internal management purposes.
The carrying value of the CGU is then compared to the higher of its
fair value less costs of disposal and its value in use. Any
impairment attributed to the goodwill is recognised immediately as
an expense and is not subsequently reversed.
Other assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount might
not be recoverable. An impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair
value less costs of disposal and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups
of assets (cash-generating units). Non-financial assets other than
goodwill that suffered an impairment are reviewed for possible
reversal of the impairment at the end of each reporting period.
1.10 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as
well as short-term deposits with original maturities of three
months or less.
1.11 Financial assets
Recognition and de-recognition
Financial assets are recognised in the statement of financial
position when the Group becomes party to the contractual provision
of the instrument.
Financial assets are derecognised when the contractual rights to
the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are
transferred.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are
initially measured at fair value adjusted for transaction costs
(where applicable). Financial assets, other than those designated
and effective as hedging instruments, are classified into the
following categories:
- Amortised cost;
- Fair value through profit or loss (FVTPL); and
- Fair value through other comprehensive income (FVOCI).
In the periods presented, the Group does not have any financial
assets categorised as FVTPL or FVOCI. The classification is
determined by both:
- The entity's business model for managing the financial asset; and
- The contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are
recognised in profit or loss are presented within finance costs,
finance income or other financial items, except for impairment of
trade receivables which is presented within sales, general and
administrative expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions (and are not designated as
FVTPL):
They are held within a business model whose objective is to hold
the financial assets and collect their contractual cash flows;
and
The contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
After initial recognition, these are measured at amortised cost
using the effective interest method. Discounting is omitted where
the effect of discounting is immaterial. The Group's trade and most
other receivables (notes 20 and 21) and cash and cash equivalents
(note 22) fall into this category of financial instruments.
Impairment of financial assets
Under IFRS 9 the requirements are to use forward-looking
information to recognise expected credit losses - the 'expected
credit loss (ECL) model'. The Group considers a broad range of
information when assessing credit risk and measuring expected
credit losses, including past events, current conditions,
reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
1.12 Trade receivables
Trade receivables are amounts due from customers for licences
sold or services performed in the ordinary course of business. They
are generally due for settlement within 30 days of the invoice date
and are therefore all classified as current. Trade receivables are
recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision
for impairment. An impairment loss is recognised when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivable. The
Group considers information developed internally or obtained from
external sources that indicates that a debtor is unlikely to pay
its creditors, including the Group, in full (without taking into
account any collateral held by the Group) as an indication that a
financial asset is not recoverable.
The Group has applied the simplified approach to measuring
expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables
have been grouped based on days overdue. The expected impairment
loss is recognised in the consolidated statement of profit or loss
and comprehensive income within sales, general and administrative
expenses, and subsequent recoveries are credited to the same
account previously used to recognise the impairment charge. During
the current and prior period the result of the above was immaterial
and no impairment loss has been recognised.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable mentioned above. The
credit qualities of these receivables are periodically assessed by
reference to external credit ratings (if available) or to
historical information about their default rates. The Group does
not hold any collateral as security.
As the total carrying amount of the current portion of the trade
and other receivables is due within the next 12 months after the
reporting date, the impact of applying the effective interest
method is not significant and, therefore, the carrying amount
equals the contractual amount or the fair value initially
recognised.
1.13 Property, plant and equipment
Property, plant and equipment is stated at historical cost less
accumulated depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the item.
Depreciation on assets is calculated using the straight-line method
to allocate their cost over their estimated useful lives, as
follows:
Fixtures and fittings: 3-10 years
IT equipment: 2-5 years
The assets' residual values and useful lives are reviewed and
adjusted if necessary at each reporting date. An asset's carrying
amount is written down immediately to its recoverable amount if the
asset's carrying amount is greater than its estimated recoverable
amount. Repairs and maintenance are charged to the consolidated
statement of profit or loss and comprehensive income as incurred.
Any gains or losses on disposals are recognised within sales,
general and administrative expenses in the consolidated statement
of profit or loss and comprehensive income unless otherwise
specified.
Property, plant and equipment are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount, which is the higher of an asset's
fair value less costs to sell and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows.
1.14 Goodwill and other intangible assets
Goodwill
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 liabilities and contingent liabilities
assumed.
The Group assesses whether goodwill has suffered any impairment
on an annual basis in accordance with the accounting policy stated
in note 1.9 above. There is one CGU, being the Group, as its
geographical operations do not have separate or distinct cash
inflows. The recoverable amount of goodwill has been determined
based on value-in-use calculations using cash flow projections from
financial budgets and forecasts.
Budgeted cash flow projections are based on the expectation of
signing new customers in the Group's sales pipeline as well as
ongoing projects with existing customers. Budgeted gross margin is
based on historical evidence and the expectations of market
development and efficiency leverage. Management believes that any
reasonable change in any of the key assumptions on which the
recoverable amount is based would not cause the reported carrying
amount to exceed the recoverable amount of the CGU. The discount
rate used reflects the Group's pre-tax weighted average cost of
capital (WACC), as adjusted for region-specific risks and other
factors as required by IFRS.
Intangible assets
Internally generated product development costs only qualify for
capitalisation if the Group can demonstrate all of the
following:
- The technical feasibility of completing the intangible asset
so that it will be available for use or sale, its intention to
complete the intangible asset and use or sell it;
- Its ability to use or sell the intangible asset; including how
the intangible asset will generate probable future economic
benefits;
- The existence of a market or, if it is to be used internally,
the usefulness of the intangible asset;
- The availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
- Its ability to measure reliably the expenditure attributable
to the intangible asset during development.
Commercial viability of new products, modules or capabilities is
generally not proven until the major high-risk development issues
have been resolved through testing of the specific development.
Development expenditure incurred on minor or major upgrades, or
other changes in software functionality, does not satisfy the
criteria, where it is considered that the product is not
substantially new in its design or functional characteristics. Such
expenditure is therefore recognised as an expense. See note 15 for
disclosure of development costs which have met the criteria of IAS
38 for recognition. The Group continues to assess the eligibility
of development costs for capitalisation on a project-by-project
basis.
Externally acquired intangible assets are initially recorded at
historical cost. Historical cost includes expenditure that is
directly attributable to the acquisition of the item.
The Group amortises intangible assets with a limited useful
life, using the straight-line method over the following
periods:
Computer software: licence period or 10 years as applicable
Internally generated software: 3-5 years
Amortisation is presented within sales, general and
administrative expenses.
Research and development which does not meet the criteria set
out above is recognised as an expense as incurred. Development
costs previously recognised as an expense are not recognised as an
asset in subsequent periods.
1.15 Trade and other payables
Trade payables are obligations to pay for goods or services
which have been acquired in the ordinary course of business from
suppliers. Trade payables are recognised initially at fair value
and subsequently measured at amortised costs using the effective
interest rate method. As the total carrying amount is due within
the next 12 months from the reporting date, the impact of applying
the effective interest method is not significant and, therefore,
the carrying amount equals the contractual amount or the fair value
initially recognised.
The Group's financial liabilities include trade and other
payables and lease liabilities. Financial liabilities are initially
measured at fair value, and, where applicable, adjusted for
transaction costs unless the Group designated a financial liability
at fair value through profit or loss. Subsequently, financial
liabilities are measured at amortised cost using the effective
interest method. All interest-related charges and, if applicable,
changes in an instrument's fair value that are reported in profit
or loss are included within finance costs or finance income. The
Group derecognises financial liabilities when, and only when, the
Group's obligations are discharged, cancelled or expired.
Trade and other payables and lease liabilities are classified as
current liabilities if payment is due within one year or less. If
not, they are presented as non-current liabilities.
1.16 Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to
settle the obligation and a reliable estimate of the amount can be
made. When the effect of the discounting is material, provisions
are measured at the present value of the expenditures expected to
be required to settle the obligation.
1.17 Employee benefits
The Group provides a range of benefits to employees, including
paid holiday arrangements and defined contribution pension
plans.
Short-term benefits
Short-term benefits, including health cover and other similar
non-monetary benefits, are recognised as an expense in the period
in which the service is received.
Post-employment benefits
The Group operates various defined contribution plans for its
employees. A defined contribution plan is a pension plan where the
Group pays fixed contributions into a separate independent entity.
The Group has no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to the employee's service in
the current and prior periods.
Employee share scheme expense
The Group makes equity-settled share-based payments to certain
employees, which are measured at fair value at the date of grant
and expensed on a straight-line basis over the vesting period,
based on the Group's estimate of shares that will eventually vest.
For those share schemes with market-related vesting conditions, the
fair value is determined using the Monte Carlo model at the grant
date. For share options issued with EPS (non-market) performance
vesting conditions, the fair value of the underlying vehicle is
equal to the grant date share price discounted by the expected
dividend yield to reflect the lack of dividend accrual over the
vesting period. For all other share awards, those with pure
employment conditions attached, the fair value is determined by
reference to the market value of the shares at the grant date or
(where they have an exercise price) by using the Black Scholes
model. For all share schemes with non-market vesting conditions,
the likelihood of vesting has been taken into account when
determining the relevant charge. Vesting assumptions are reviewed
during each reporting period to ensure they reflect current
expectations.
1.18 Equity
Ordinary shares
Ordinary shares are classified as equity. There are no
restrictions on the distribution of capital and the repayment of
capital.
Cumulative translation reserve
Exchange differences arising on translation of foreign
subsidiaries are recognised in Other Comprehensive Income and
accumulated in a separate reserve within equity. The cumulative
amount would be reclassified to profit or loss if the entity was
disposed of.
Own shares
Own shares represent the shares of the parent company Alfa
Financial Software Holdings PLC that are either held by the
employee benefit trust, or acquired by the Group as part of its
share buyback programme (see note 28).
Own shares are recorded at cost and deducted from equity.
1.19 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of Alfa by the weighted average
number of ordinary shares outstanding during the year (excluding
own shares held).
Diluted earnings per share
Diluted earnings per share is calculated in line with the basic
earnings per share calculation above except that the weighted
average number of shares includes all potentially dilutive options
granted by the reporting date as if those options had been
exercised on the first day of the accounting period or the date of
the grant, if later. The shares have no right to voting or to
dividends while held in trust.
2. Critical accounting judgements, estimates and assumptions
The preparation of financial statements requires the use of
accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgement in
applying the Group's accounting policies.
This note provides an overview of the areas that involved a
higher degree of judgement or complexity, and of items which are
more likely to be materially adjusted in future periods due to
estimates and assumptions turning out to be wrong. Detailed
information about each of these estimates and judgements is
included in other notes, together with information about the basis
of calculation for each affected line item in the financial
statements.
2.1 Critical judgements in applying the Group's accounting
policies
Revenue recognition - Assessing performance obligations
The Group is required to make an assessment as to whether the
implementation process, which includes customised licence and
implementation revenue streams as well as any maintenance fees
during this phase, forms one or a number of performance
obligations. Since the residual value method is used for the
customised licence revenue (as explained in note 1.5), the
estimation of fair value of implementation revenue will impact the
contract consideration assigned to the customised licence.
In addition, the Group is also required to make an assessment as
to whether each contract contains an expectation to deliver
multiple separate instances of the customised licence which may
form separate groups of distinct performance obligations. In doing
the above, the Group assesses each software implementation contract
as to whether the underlying software requires significant
modification or customisation by the Group in order to meet the
customer's requirements before Alfa Systems can be utilised by the
customer. Therefore judgement is required in determining which
efforts relate to the implementation process and which efforts
could be determined to be development services which change or
enhance the underlying code. In making this judgement, the Group
assesses the contractual terms and the original project plan for
the implementation but also uses historical evidence of what
constitutes core implementation work.
Internally generated software development - Assessing whether a
project meets criteria of IAS 38
The Group is required to make an assessment of each ongoing
project in order to determine at what stage (if at all) a project
meets the criteria outlined in the Group's accounting policies.
Such assessment may, in certain circumstances, require significant
judgement. In making this judgement, the Group evaluates, amongst
other factors, the stage at which technical feasibility has been
achieved, management's intention to complete and use or sell the
product, the likelihood of success, the availability of technical
and financial resources to complete the development phase and
management's ability to measure reliably the expenditure
attributable to the project. Research and product development
expenditure incurred on minor or major upgrades, or other changes
in software functionality, does not satisfy the criteria where it
is considered that the product is not substantially new in its
design or functional characteristics. Such expenditure is therefore
recognised as an expense.
2.2 Key sources of estimation uncertainty
Revenue recognition - Estimates feeding through to the
customised licence
The customised licence and its associated material right are
both impacted by the following estimates:
Assigning a stand-alone selling price for implementation
services day rates: the Group assesses the value of the
implementation services delivered by assessing the effective day
rate for an implementation contract, taking into account all
revenue streams from implementation contracts against day rates of
similar projects in the same geographies;
Estimating the appropriate life of customer relationship: the
Group calculates the material right deferral of the customised
licence based on the total customer relationship life. This is also
the time over which the material right will be spread; and
Determining the split of maintenance amount between support
efforts and right to use: the Group must estimate what percentage
of the total maintenance fee relates to the customised licence.
A change to the stand-alone selling price for implementation
services to the effective day rate, or an increase in expected
customer life by a year, or a 10% variance in the split of
maintenance amount between support efforts and right to use,
results in an impact on revenue for the year of up to an increase /
decrease of GBP0.1m.
2.3 Other sources of estimation uncertainty
Revenue recognition - Number of forecast implementation and
development days
The Group estimates the number of days required to complete the
relevant implementation work and software customisation effort at
the outset of each project and on an ongoing basis including at
each consolidated statement of financial position date. Estimates
of total project days required for a relevant project are based on
historical evidence of past implementations, knowledge of the
customer's systems being replaced and scope of customisation being
requested. The Group applies the percentage-of-completion method
when calculating implementation and development services revenue
and updates estimates at each quarter end accordingly. Therefore, a
significant movement in total planned days would result in
volatility in implementation and customised licence revenue.
3. Financial risk management
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
Exposure arising
Area from Measurement Management
------------------- ---------------------- --------------------- ----------------------
Market risk Contracted revenue Cash flow forecasting Natural hedging
- foreign exchange and costs denominated and foreign exchange from localised
in a currency sensitivity cost base and
other than the prompt conversion
entity's functional of foreign currency
currency; and cash balances
Monetary assets into pound sterling
and liabilities Use of forward
denominated in contracts to manage
a currency other some of the foreign
than the entity's exchange risk
functional currency.
------------------- ---------------------- --------------------- ----------------------
Credit risk Cash and cash Credit ratings Diversification
- cash balances equivalents of bank deposits
------------------- ---------------------- --------------------- ----------------------
Credit risk Trade receivables Ageing analysis Credit checks
- customer and accrued income Credit ratings and contractual
receivables payment terms
------------------- ---------------------- --------------------- ----------------------
Liquidity Cash and cash Daily cash reporting Cash forecasting
equivalents and managing maturity
of cash deposits
------------------- ---------------------- --------------------- ----------------------
The Group's overall risk management policy focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance. The
Group has used financial instruments to hedge certain risk
exposures in the past. Risk management is carried out by the
finance function under policies approved by the Chief Financial
Officer. The finance function identifies, evaluates and mitigates
financial risks when deemed necessary.
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other
stakeholders and maintain an optimal capital structure.
3.1 Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risks arising from various currencies, primarily with
respect to those described below. Revenue is predominantly
denominated in pounds sterling and US dollars. Operating costs are
influenced by the currencies of the countries where the Group's
subsidiaries are based and pounds sterling and the US dollars are
the currencies in which most operating costs are denominated.
The split by currency in relation to trade receivables is set
out in note 20.
The Group's exposure to foreign currency risk in relation to
revenue is set out in note 5.4.
The Group utilised forward contracts during the year to hedge
against foreign currency exposure during the current year (2021: no
hedging arrangement entered into). The Group does not have any
outstanding commercial foreign exchange contracts at 31 December
2022 or 31 December 2021. No hedge accounting has been applied in
the year.
A 10% increase in the USD:GBP exchange rate in the year ended 31
December 2022 would have increased revenue and profit by 4% and 8%
respectively. Management believe that 10% is a reasonable
sensitivity given historic exchange rate movement.
3.2 Credit risk
a. Credit risk related to transactions with financial institutions
Credit risk with financial institutions is managed by the
Group's finance function in accordance with a Board approved
policy. Management is not aware of any significant risks associated
with financial institutions as a result of cash and cash
equivalents deposits (including short-term investments) and
financial derivative transactions.
b. Credit risks related to customer trade receivables
Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation,
change of strategy and default or delinquency in payments are
considered indicators that a trade receivable could be impaired.
Given the complexity, the size and the length of certain software
implementation of related projects, a delay in the settlement of an
open trade receivable does not necessarily constitute objective
evidence that the trade receivable is impaired.
The Group's customer base predominantly consists of large
financial institutions that are financially sound. The
responsibility for customer credit risk management rests with
management of the Group. Payment terms are set in accordance with
practices in the different geographies and end-markets served,
typically being 30 days from the date of the invoice. Trade
receivables are actively monitored and managed. Collection risk is
mitigated through prompt submission of licence and maintenance
invoices. Historically, there has been a de minimis level of
customer default as a result of the long history of dealing with
the Group's customer base and an active credit monitoring function.
Where applicable, credit limits may be established based on
internal or external rating criteria, which take into account such
factors as the financial condition of the customers, their credit
history and the risk associated with their industry segment.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and accrued income. To measure
the expected credit losses, trade receivables and accrued income
have been grouped based on shared credit risk characteristics and
the days past due. The accrued income relates to unbilled work in
progress and has substantially the same risk characteristics as the
trade receivables for the same types of contracts, other than where
the Group has collected upfront payments in the form of licence
fees at the start of a software implementation contract. The Group
has concluded that the expected loss rates for trade receivables
are less than the loss rates for the accrued income.
The expected loss rates of trade receivables are based on the
payment profiles of customer invoices over a period of 36 months
before 31 December 2022 or 31 December 2021 respectively and the
corresponding historical credit losses experienced within this
period. The historical loss rates would then be adjusted to reflect
current or forward-looking information in relation to any
macroeconomic factors affecting the ability of the customers to
settle the receivables. The same approach is applied to both trade
receivables and accrued income expected credit loss provisions.
The Group has not identified any current factors or
forward-looking information which would be relevant to the
historical loss rates as all trade receivables have been collected
in the past 24 months. Therefore on this basis, the loss allowance
as at 31 December 2022 and 31 December 2021 was immaterial for both
trade receivables and accrued income.
See note 20 - Trade receivables for the ageing of trade
receivables and significant customer credit risk exposure.
3.3 Liquidity risk
The Group's principal objective when managing capital is to
safeguard the Group's ability to continue as a going concern, so
that it can continue to provide returns for shareholders and
benefits for other stakeholders.
The capital structure of the Group consists of cash and cash
equivalents (note 22) and equity attributable to equity holders of
the parent.
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Group manages its exposure to liquidity risk through short
and long-term forecasts and by seeking to align the maturity
profiles of its financial assets with its financial liabilities.
The Group's policy is to maintain an adequate level of liquidity to
meet its liabilities expected to be settled in the short or near
term, under both normal and stressed conditions.
The following table details the remaining contractual maturity
of the Group's financial liabilities. The amounts disclosed in the
table are the contractual undiscounted cash flows.
31 December 2022
----- ------------------------------------------------
Between Between Between
Less than 6 to 12 1 to 2 2 to 5 More than
GBPm Total 6 months months years years 5 years
------------------------- ----- --------- -------- ------- ------- ---------
Trade and other payables 7.6 7.6 - - - -
Lease liabilities -
future lease payments 10.9 0.9 0.9 1.7 4.6 2.8
------------------------- ----- --------- -------- ------- ------- ---------
31 December 2021
----- ------------------------------------------------
Between Between Between
Less than 6 to 12 1 to 2 2 to 5 More than
GBPm Total 6 months months years years 5 years
------------------------- ----- --------- -------- ------- ------- ---------
Trade and other payables 6.9 6.9 - - - -
Lease liabilities -
future lease payments 20.3 1.3 1.4 2.7 7.4 7.5
------------------------- ----- --------- -------- ------- ------- ---------
4. Segments and principal activities
4.1 Revenue by stream
The Group assesses revenue by type of activity, being
Subscription, Software and Services, as summarised below:
GBPm 2022 2021
-------------- ---- -----
Subscription 27.4 23.5
Software 16.3 13.6
Services 49.6 46.1
-------------- ---- -----
Total revenue 93.3 83.2
-------------- ---- -----
4.2 Operating profit
The following table reconciles profit for the period
attributable to equity holders to Operating Profit for the periods
presented:
GBPm 2022 2021
---------------------------- ---- ----
Profit for the year 24.5 19.2
Adjusted for:
Net loss from joint venture 0.1 0.1
Taxation 4.4 4.6
Finance expense 0.6 0.8
---------------------------- ---- ----
Operating profit 29.6 24.7
---------------------------- ---- ----
4.3 Non-current assets geographical information
Non-current assets attributable to each geographical market:
GBPm 2022 2021
------------------------- ---- ----
UK 34.4 41.3
USA 1.2 0.8
Rest of World 0.3 0.5
------------------------- ---- ----
Total non-current assets 35.9 42.6
------------------------- ---- ----
Revenue by geographical market is contained within note 5.3. The
table above excludes deferred tax assets for both 2021 and
2022.
5. Revenue from contracts with customers
5.1 Customer concentration
Customers with revenue accounting for more than 10% of total
revenue in the current year are as follows:
GBPm 2022 2021
----------- ---- ----
Customer A 11% 10%
----------- ---- ----
See note 20 for outstanding trade receivables from those
customers with revenue accounting for more than 10% of total
revenue.
5.2 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:
2022 Total
GBPm Subscription Software Services revenue
---------------------------------------- ------------ -------- -------- --------
At a point in time - time and materials - 8.9 33.1 42.0
At a point in time - fixed price - 0.4 0.4 0.8
Over time - time and materials - 6.1 16.1 22.2
Over time - fixed price 27.4 0.9 - 28.3
---------------------------------------- ------------ -------- -------- --------
Total revenue 27.4 16.3 49.6 93.3
---------------------------------------- ------------ -------- -------- --------
2021 Total
GBPm Subscription Software Services revenue
---------------------------------------- ------------ -------- -------- --------
At a point in time - time and materials - 5.6 25.2 30.8
At a point in time - fixed price - 2.1 - 2.1
Over time - time and materials - 4.1 19.8 23.9
Over time - fixed price 23.5 1.8 1.1 26.4
---------------------------------------- ------------ -------- -------- --------
Total revenue 23.5 13.6 46.1 83.2
---------------------------------------- ------------ -------- -------- --------
All goods and services are sold directly to customers.
5.3 Revenue geographical information
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:
GBPm 2022 2021
----------------------- ---- ----
UK 31.0 30.0
USA 33.6 28.9
Rest of EMEA (excl UK) 21.3 18.7
Rest of World 7.4 5.6
----------------------- ---- ----
Total revenue 93.3 83.2
----------------------- ---- ----
5.4 Revenue by currency
Revenue by contractual currency is as follows:
GBPm 2022 2021
-------------- ---- ----
GBP 39.0 35.9
USD 34.3 30.0
Euro 12.6 11.6
Other 7.4 5.7
-------------- ---- ----
Total revenue 93.3 83.2
-------------- ---- ----
5.5 Liabilities from contracts with customers
GBPm 2022 2021
-------------------------------------------- ---- ----
Contract liabilities - deferred licence 8.6 5.3
Contract liabilities - deferred maintenance 6.2 5.7
-------------------------------------------- ---- ----
Total contract liabilities 14.8 11.0
-------------------------------------------- ---- ----
Contract liabilities - deferred licence
Where a customer purchases a perpetual software licence this is
generally invoiced upfront at the commencement of the
implementation project. Customers generally require additional
development efforts over the life of the implementation project in
order to customise the underlying code within Alfa Systems.
Together these two elements form the Group's customised licence
performance obligation. The fair value of this performance
obligation is determined using the residual method as set out in
note 1.5.2 and this fair value is recognised as the development
effort is expended, on a percentage of completion basis.
As such the deferred licence contract liability balance as at 31
December 2022 and 31 December 2021 represents any amounts received
in advance for the customised licence performance obligation being
satisfied (including any unrecognised software licence amounts that
were received upfront). Additionally, where an option over the
right to use Alfa Systems in the future exists, the value of this
is also included within the deferred licence contract liability.
The contract liability relating to the material right value is
increased over the life of the implementation project in line with
the percentage of completion of the development efforts and then
released on a straight-line basis over the expected remaining
customer life post completion of the implementation project.
The deferred licence contract liability balance will increase
during the year as a result of:
Any new upfront software licence payments;
- Any write back in previously recognised revenue as a result of
project extensions or re-plans;
- Decreasing percentage of completion of development efforts; and
- Any additional material right balances that are added during the year.
The deferred licence contract liability balance will decrease
during the year as a result of:
- Increasing percentage of completion of development efforts; and
- Any release of material right balances following the
completion of the implementation project.
Contract liabilities - deferred maintenance
The majority of the Group's customers are invoiced annually in
advance for the maintenance and support service provided by the
Group. As such, the deferred maintenance contract liability balance
will increase as a result of billing and invoices becoming due, and
will decrease as the Group satisfies its associated performance
obligations. The deferred maintenance contract liability balance as
at 31 December 2022 and 31 December 2021 therefore represents the
Group's unsatisfied period maintenance performance obligation for
which the revenue has been invoiced in advance.
5.6 Unsatisfied performance obligations
During 2020, the Group entered into a new one-off five-year
contract with a customer to renew its software licence and
maintenance agreements. The total amount of the contract price from
this non-cancellable contract that relates to the performance
obligations that are unsatisfied at 31 December 2022 is GBP6.2m
(2021: GBP8.4m). We expect to recognise GBP2.2m in each of the next
two financial years and then the remaining GBP1.8m in the final
financial year of the contract, being 2025.
In addition, the Group has unsatisfied or partially satisfied
performance obligations at 31 December 2022 that relate to the
licence customisation for those customers that have ongoing
implementation projects. This performance obligation includes the
delivery of the related software licence and any development
efforts which will change the underlying code. Linked to certain of
these ongoing and future projects, and also to certain
implementation projects completed during 2022, the Group also has
unsatisfied or partially satisfied performance obligations at 31
December 2022 that relate to the option over the right to use Alfa
Systems, and in particular any material right in respect of
discounts to be received by customer in future periods.
The above includes certain amounts recognised as contract
liabilities. The transaction price allocated to these unsatisfied
or partially satisfied performance obligations as at 31 December
2022 is GBP11.0m (2021: GBP11.1m). This amount is expected to be
recognised over the remaining life of the implementation projects,
in respect of the licence and development efforts, and over the
expected customer life (following the completion of the
implementation project) in respect of the option over the right to
use Alfa Systems.
These unsatisfied or partially satisfied performance obligations
are based on management's best judgement and may be impacted in the
future by a number of factors including:
- Any possible contract modifications;
- Currency fluctuations;
- External market factors; and
- Changes to the overall forecast project plan including the
overall life of the implementation project and any required
development efforts.
The Group applies the practical expedient in paragraph 121 of
IFRS 15 and does not disclose information about the unsatisfied
performance obligations that have original expected durations of
one year or less. This includes those performance obligations
linked to ongoing services for all project types (i.e.
subscription, software and services).
The Group also applies the practical expedient in paragraph B16
of IFRS 15 and does not disclose the amount of the transaction
price allocated to the unsatisfied contract performance obligations
where consideration will be received directly corresponding to the
value of the performance obligation in the future and this
consideration aligns to the value received to date for the
corresponding performance obligation. This includes those
performance obligations linked to our software implementation
services.
The Group has variable consideration in the form of contract
banding for its licence and maintenance volumes. It is included it
in the transaction price only to the extent that it is highly
probable that a significant reversal of revenue will not occur when
the uncertainty associated with the variable consideration is
subsequently resolved.
6. Operating profit
The following items have been included in arriving at operating
profit in the table below:
GBPm 2022 2021
------------------------------------------------ ------ ----
Research and development costs 2.2 1.6
Depreciation of property, plant and equipment 0.5 0.4
Depreciation of right-of-use lease assets 1.7 1.9
Amortisation of intangible assets 0.8 0.8
Foreign exchange (gain)/loss (1.1) 0.2
Share-based payments (including social security
contributions) 1.8 1.5
------------------------------------------------ ------ ----
7. Personnel related costs
GBPm 2022 2021
------------------------------------------------------ ---- -----
Wages and salaries 34.8 31.8
Social security contributions (on wages and salaries) 4.4 3.9
Pension costs 2.6 2.1
Profit share pay* 3.5 3.1
Share-based payments** 1.8 1.5
------------------------------------------------------ ---- -----
Total employment costs 47.1 42.4
------------------------------------------------------ ---- -----
* Profit share pay refers to a pool of money (that equates to
approximately 10% of the Group's pre-tax profits) 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 based
on location of home office (including Executive
Directors) 2022 2021
------------------------------------------------- ---- ----
UK 307 282
USA 75 71
Rest of World 38 30
------------------------------------------------- ---- ----
Total average monthly number of people employed 420 383
------------------------------------------------- ---- ----
At 31 December 2022 the Group had 441 employees (2021: 382).
8. Key management
Key management compensation (including Directors):
GBPm 2022 2021
---------------------------------------- ---- ----
Wages, salaries and short-term benefits 2.7 3.1
Social security contributions 0.3 0.4
Post-employment benefits 0.1 0.1
Share-based payments* 1.1 0.9
---------------------------------------- ---- ----
Total key management compensation 4.2 4.5
---------------------------------------- ---- ----
* This includes the related social security contributions.
Key management personnel consist of the Company Leadership Team
and the Executive and Non-Executive Directors. Directors'
remuneration is detailed in the Remuneration Report.
9. Auditor's remuneration
The Group obtained the following services from the Group's
auditor as detailed below:
GBPm 2022 2021
----------------------------------------------- ---- ----
Audit fees
RSM UK Audit LLP
Audit of the consolidated financial statements 0.2 0.2
Audit of subsidiaries 0.2 0.2
----------------------------------------------- ---- ----
Total audit fees 0.4 0.4
----------------------------------------------- ---- ----
Audit-related assurance fees
Review of interim financial report 0.1 0.1
----------------------------------------------- ---- ----
Total audit-related assurance fees 0.1 0.1
----------------------------------------------- ---- ----
Non-audit services - -
----------------------------------------------- ---- ----
Total audit and non-audit-related services 0.5 0.5
----------------------------------------------- ---- ----
10. Finance income and expense
GBPm 2022 2021
--------------------------------------------------- ---- ----
Finance income
Interest income on cash or short-term bank deposits - -
--------------------------------------------------- ---- ----
GBPm Note 2022 2021
------------------------------ ---- ----- -----
Finance expense
Interest on lease liabilities 24 (0.6) (0.8)
------------------------------ ---- ----- -----
Total finance expense (0.6) (0.8)
------------------------------ ---- ----- -----
11. Income tax expense
Analysis of charge for the year
GBPm 2022 2021
-------------------------------------------------- ----- -----
Current tax:
Current tax on profit for the year 5.2 4.5
Adjustment in respect of prior years (1.4) (0.5)
Foreign tax on profit of subsidiaries for the
current year 0.3 0.3
-------------------------------------------------- ----- -----
Current tax 4.1 4.3
-------------------------------------------------- ----- -----
Deferred tax:
Origination and reversal of temporary differences 0.2 (0.1)
Adjustment in respect of prior years 0.1 0.6
Effect of changes in tax rates - (0.2)
-------------------------------------------------- ----- -----
Deferred tax 0.3 0.3
-------------------------------------------------- ----- -----
Total tax charge in the year 4.4 4.6
-------------------------------------------------- ----- -----
The effective tax rate for the year is lower (2021: higher) than
the standard rate of corporation tax in the UK. The effective tax
rate for the year ended 31 December 2022 was 15.2% (2021: 19.3%).
The effective tax rate for the year is impacted by favourable
adjustments in respect to prior years totalling GBP1.3m (2021:
unfavourable adjustment of GBP0.1m), due to the benefit of the UK
R&D claim for 2021 of GBP0.9m and favourable adjustments in
respect of prior year provisions of GBP0.4m (2021: increased tax
costs for prior year of GBP0.2m, an adjustment in respect to
deferred tax on share awards of GBP0.5m, less the benefit of the UK
R&D claim for 2020 of GBP0.6m). Given the changes in the UK
R&D tax regime, the benefit to Alfa is expected to reduce in
the future and as a consequence the effective tax rate will trend
towards the UK statutory tax rate.
The overall tax charge for the year is reconciled as
follows:
Analysis of charge for the year
GBPm 2022 2021
---------------------------------------------- ----- -----
Profit on ordinary activities before taxation 28.9 23.8
---------------------------------------------- ----- -----
Profit on ordinary activities at the standard
rate of corporation tax - 19% 5.5 4.5
Tax effects of:
Effect of different tax rates of subsidiaries
operating in other jurisdictions 0.1 0.1
Adjustment in respect of prior years (1.3) 0.1
Impact of tax rate changes - (0.2)
Other 0.1 0.1
---------------------------------------------- ----- -----
Total tax charge for the year 4.4 4.6
---------------------------------------------- ----- -----
12. Earnings per share
2022 2021
---------------------------------------------- ----------- ------------
Profit attributable to equity holders of Alfa
(GBPm) 24.5 19.2
Weighted average number of shares outstanding
during the year 296,309,874 296,709,610
Basic earnings per share (pence per share) 8.24 6.49
Weighted average number of shares outstanding
including potentially dilutive shares 302,038,789 301,505,177
Diluted earnings per share (pence per share) 8.09 6.39
---------------------------------------------- ----------- ------------
The weighted average number of ordinary shares in issue excludes
3,690,126 (2021: 3,290,390) shares, being the weighted average
number of shares held by the Group under the employee benefit trust
and in Treasury as a result of the share buyback programme. The
diluted number of ordinary shares outstanding, including share
awards, is calculated on the assumption of conversion of all
5,728,914 (2021: 5,470,741) potentially dilutive ordinary shares.
The increase in both Basic EPS and Diluted EPS in the current year
is impacted by the Group's share buyback programme that commenced
in 2022.
13. Financial assets and liabilities
GBPm Note 2022 2021
----------------------------------------- ---- ---- -----
Financial assets
Financial assets at amortised cost:
Trade receivables 20 8.9 6.0
Other financial assets at amortised cost 21 6.7 7.3
Cash and cash equivalents 22 18.7 23.1
----------------------------------------- ---- ---- -----
Total financial assets 34.3 36.4
----------------------------------------- ---- ---- -----
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 23 7.6 6.9
Lease liabilities 24 9.3 17.1
----------------------------------------- ---- ---- -----
Total financial liabilities 16.9 24.0
----------------------------------------- ---- ---- -----
14. Goodwill
GBPm 2022 2021
--------------- ---- ----
Cost
At 1 January 24.7 24.7
--------------- ---- ----
At 31 December 24.7 24.7
--------------- ---- ----
The recoverable amount of goodwill has been determined based on
value-in-use calculations using cash flow projections from
financial budgets and forecasts for a five-year period using a
pre-tax discount rate of 12.2% (2021: 11.0%) which is based on the
CGU's weighted average cost of capital. Cash flows beyond these
periods have been extrapolated using a steady 2.5% (2021: 2.0%)
average growth rate which is reflective of management's best
estimate at the time. Management believes that any reasonable
change in any of the key assumptions on which the recoverable
amount is based would not cause the reported carrying amount to
exceed the recoverable amount of the CGU.
15. Other intangible assets
Internally
Computer generated
GBPm software software Total
---------------------- --------- ---------- -----
Cost
At 1 January 2021 1.5 2.2 3.7
Additions 0.1 0.9 1.0
---------------------- --------- ---------- -----
At 31 December 2021 1.6 3.1 4.7
---------------------- --------- ---------- -----
Amortisation
At 1 January 2021 0.8 0.7 1.5
Charge for the year 0.1 0.7 0.8
---------------------- --------- ---------- -----
At 31 December 2021 0.9 1.4 2.3
---------------------- --------- ---------- -----
Net book value
At 31 December 2021 0.7 1.7 2.4
---------------------- --------- ---------- -----
Cost
At 1 January 2022 1.6 3.1 4.7
Additions 0.1 1.5 1.6
Disposals - (0.3) (0.3)
---------------------- --------- ---------- -----
At 31 December 2022 1.7 4.3 6.0
---------------------- --------- ---------- -----
Amortisation
At 1 January 2022 0.9 1.4 2.3
Charge for the period 0.1 0.7 0.8
Disposals - - -
---------------------- --------- ---------- -----
At 31 December 2022 1.0 2.1 3.1
---------------------- --------- ---------- -----
Net book value
At 31 December 2022 0.7 2.2 2.9
---------------------- --------- ---------- -----
Significant movement in other intangible assets
During 2022, Alfa developed new internally generated software at
a cost of GBP1.5m (2021: GBP0.9m). This software will be amortised
over three to five years. The total research and product
development expense for the period was GBP2.2m (2021: GBP1.6m).
16. Property, plant and equipment
Fixtures
GBPm and fittings IT equipment Total
-------------------- ------------- ------------ -----
Cost
At 1 January 2021 1.2 3.3 4.5
Additions - 0.3 0.3
Disposals - (0.1) (0.1)
-------------------- ------------- ------------ -----
At 31 December 2021 1.2 3.5 4.7
-------------------- ------------- ------------ -----
Depreciation
At 1 January 2021 0.7 2.9 3.6
Charge for the year 0.1 0.3 0.4
Disposals - (0.1) (0.1)
-------------------- ------------- ------------ -----
At 31 December 2021 0.8 3.1 3.9
-------------------- ------------- ------------ -----
Net book value
At 31 December 2021 0.4 0.4 0.8
-------------------- ------------- ------------ -----
Cost
At 1 January 2022 1.2 3.5 4.7
Additions 0.4 0.3 0.7
Disposals (0.1) - (0.1)
-------------------- ------------- ------------ -----
At 31 December 2022 1.5 3.8 5.3
-------------------- ------------- ------------ -----
Depreciation
At 1 January 2022 0.8 3.1 3.9
Charge for the year 0.2 0.3 0.5
Disposals (0.1) - (0.1)
-------------------- ------------- ------------ -----
At 31 December 2022 0.9 3.4 4.3
-------------------- ------------- ------------ -----
Net book value
At 31 December 2022 0.6 0.4 1.0
-------------------- ------------- ------------ -----
17. Right-of-use assets
Motor
GBPm vehicles Property Total
-------------------- --------- -------- -----
Cost
At 1 January 2021 0.2 17.9 18.1
Additions 0.2 1.3 1.5
-------------------- --------- -------- -----
At 31 December 2021 0.4 19.2 19.6
-------------------- --------- -------- -----
Depreciation
At 1 January 2021 0.1 3.2 3.3
Charge for the year 0.1 1.8 1.9
-------------------- --------- -------- -----
At 31 December 2021 0.2 5.0 5.2
-------------------- --------- -------- -----
Net book value
At 31 December 2021 0.2 14.2 14.4
-------------------- --------- -------- -----
Cost
At 1 January 2022 0.4 19.2 19.6
Additions 0.1 - 0.1
Disposals - (8.3) (8.3)
-------------------- --------- -------- -----
At 31 December 2022 0.5 10.9 11.4
-------------------- --------- -------- -----
Depreciation
At 1 January 2022 0.2 5.0 5.2
Charge for the year 0.1 1.6 1.7
Disposals - (2.6) (2.6)
-------------------- --------- -------- -----
At 31 December 2022 0.3 4.0 4.3
-------------------- --------- -------- -----
Net book value
At 31 December 2022 0.2 6.9 7.1
-------------------- --------- -------- -----
The disposal relates to the assignment of the lease to the 9th
floor of Moor Place, 1 Fore Street Avenue, London. Refer to note
32.
The Group recognised the following amounts in the consolidated
statement of profit or loss and comprehensive income in relation to
leases under IFRS 16:
GBPm 2022 2021
---------------------------- ----- -----
Depreciation (1.7) (1.9)
Interest expense (0.6) (0.8)
Short -- term lease expense (0.2) (0.2)
---------------------------- ----- -----
Sub-lease rentals
One of the leased properties was being sub-leased to tenants
under operating leases, with rentals payable quarterly. This
sub-lease ended during 2022. Minimum lease payments receivable on
these sub-leases of property are as follows:
GBPm 2022 2021
-------------------------------------------------- ---- ----
Within one year - -
Later than one year but not later than five years - -
Later than five years - -
-------------------------------------------------- ---- ----
Total sub-lease payments receivable - -
Income from sub-lease in the year 0.5 0.5
-------------------------------------------------- ---- ----
18. Deferred income tax
The provision for deferred tax consists of the following
deferred tax assets/(liabilities) relating to accelerated capital
allowances and short-term timing differences in relation to
accruals and share-based payments.
GBPm 2022 2021
----------------------------------------------------- ----- -----
Balance as at 1 January 1.8 1.8
Effect of changes in tax rates - 0.2
Adjustments in respect of prior period (0.1) (0.6)
Deferred income taxes recognised in the consolidated
statement of profit or loss and comprehensive
income (0.2) 0.1
Deferred tax on share-based payments recognised
in reserves 0.1 0.3
Balance as at 31 December 1.6 1.8
----------------------------------------------------- ----- -----
Consisting of:
Depreciation in excess of capital allowances (0.1) -
Other timing differences 1.7 1.8
----------------------------------------------------- ----- -----
Balance as at 31 December 1.6 1.8
----------------------------------------------------- ----- -----
Deferred income tax liabilities have not been recognised for the
withholding tax and other taxes that would be payable on the
unremitted earnings of certain subsidiaries as the Group is able to
control the timing of these temporary differences and it is
probable that they will not reverse in the foreseeable future.
Unremitted earnings totalled GBP4.1m at 31 December 2022 (2021:
GBP3.4m).
At the reporting date, 75% (2021: 72%) of the provision for
deferred tax relates to the UK.
19. Interests in joint venture
At the beginning of May 2020, the Group formed Alfa iQ, a joint
venture established to greatly enhance Alfa's ability to develop
artificial intelligence solutions for the auto and equipment
finance industry. The joint venture was set up 51:49 between Alfa
and Bitfount, a company founded by Blaise Thomson. The financial
and operating activities of the Group's joint venture are jointly
controlled by the participating shareholders. The participating
shareholders have rights to the net assets of the joint venture
through their equity shareholdings.
The interest in the joint venture consists of part investment
and part loan to joint venture accounted for as set out in note
1.2.
Investment
GBPm 2022 2021
----------------------------------------- ----- -----
Carrying amount as at 1 January 0.2 0.3
Share of net loss from the joint venture (0.1) (0.1)
----------------------------------------- ----- -----
Carrying amount as at 31 December 0.1 0.2
----------------------------------------- ----- -----
Loan to joint venture
GBPm 2022 2021
---------------------------------- ---- ----
Carrying amount as at 1 January 0.1 0.1
Interest - -
---------------------------------- ---- ----
Carrying amount as at 31 December 0.1 0.1
---------------------------------- ---- ----
The total loss from interest in joint venture is GBP0.1m (2021:
GBP0.1m) and the total interest in the joint venture is GBP0.2m
(2021: GBP 0.3m).
20. Trade receivables
GBPm 2022 2021
------------------------- ---- ----
Trade receivables 8.9 6.0
Provision for impairment - -
------------------------- ---- ----
Trade receivables - net 8.9 6.0
------------------------- ---- ----
Ageing of trade receivables
Ageing of net trade receivables GBPm 2022 2021
------------------------------------- ---- ----
Within agreed terms 6.4 4.1
Past due 1-30 days 2.4 1.2
Past due 31-90 days 0.1 0.6
Past due 91+ days - 0.1
------------------------------------- ---- ----
Trade receivables - net 8.9 6.0
------------------------------------- ---- ----
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.
Currency of trade receivables
GBPm 2022 2021*
------------------------ ---- -----
GBP 4.5 3.4
USD 2.7 2.4
Other 1.7 0.2
------------------------ ---- -----
Trade receivables - net 8.9 6.0
------------------------ ---- -----
* The 2021 USD figure was originally stated to be GBP0.9m and
included only USD balances held in the US subsidiary. This has been
restated to GBP2.4m to include USD balances within UK subsidiaries
as well with a corresponding reduction in the GBP balances, and so
has no impact on the overall total.
Trade receivables due from significant customers
Customers with revenue accounting for more than 10% of total
revenue in the current year have outstanding trade receivables as
follows:
GBPm 2022 2021
----------- ---- ----
Customer A 0.7 0.8
----------- ---- ----
As at issuance of these financial statements, all amounts
relating to customers accounting for more than 10% of total revenue
had been collected.
Impairment and risk exposure
Information about the impairment of trade receivables and the
Group's exposure to market risk (specifically foreign currency
risk) and credit risk can be found in note 3.
21. Other receivables held at amortised cost
GBPm 2022 2021
----------------------------------------------- ---- ----
Accrued income 6.5 6.3
Prepayments 4.5 3.2
Corporation tax recoverable 0.2 -
Other receivables 0.2 1.0
----------------------------------------------- ---- ----
Total other receivables held at amortised cost 11.4 10.5
----------------------------------------------- ---- ----
Accrued income represents fees earned but not yet invoiced at
the reporting date which has no right of offset with contract
liabilities - deferred licence amounts.
Accrued income increased by GBP0.2m. The current year balance
represents unbilled professional fees for work in progress, and
GBP0.5m of one-off licence revenue items where there is contractual
agreement to invoice in subsequent periods.
Prepayments include GBP1.7m (2021: GBP1.1m) of deferred costs in
relation to costs to fulfil contracts - see note 1.5. During the
year GBP0.3m (2021: GBP0.2m) relating to costs to fulfil contracts
has been recognised within cost of sales.
22. Cash and cash equivalents
GBPm 2022 2021
-------------------------- ---- ----
Cash at bank and in hand 18.7 23.1
-------------------------- ---- ----
Cash and cash equivalents 18.7 23.1
-------------------------- ---- ----
Currency of cash and cash equivalents
GBPm 2022 2021
-------------------------- ---- ----
GBP 10.0 14.9
USD 4.3 4.4
AUD 2.1 1.3
EUR 1.9 2.0
Other 0.4 0.5
-------------------------- ---- ----
Cash and cash equivalents 18.7 23.1
-------------------------- ---- ----
Cash and cash equivalents are all held with banks and other
financial instructions which must fulfil credit rating and
investment criteria approved by the Board.
23. Current and non-current liabilities
GBPm 2022 2021
-------------------------------------------- ----- ------
Trade payables 0.8 0.8
Other payables 8.7 8.5
Corporation tax - 1.8
Contract liabilities - deferred licence 8.6 5.3
Contract liabilities - deferred maintenance 6.2 5.7
Lease liabilities (note 24) 9.3 17.1
Provisions for other liabilities 0.9 1.4
-------------------------------------------- ----- ------
Total current and non-current liabilities 34.5 40.6
Less non-current portion (8.9) (16.6)
-------------------------------------------- ----- ------
Total current liabilities 25.6 24.0
-------------------------------------------- ----- ------
Other payables includes amounts relating to other tax and social
security of GBP1.9m (2021: GBP2.4m). Of the remainder, GBP5.3m
(2021: GBP4.1m) relates to amounts due as part of payroll.
The corporation tax payable of GBP1.8m in 2021 is a receivable
in 2022 (see note 21).
24. Lease liabilities
The following table sets out the reconciliation of the lease
liabilities from 1 January to the amount disclosed at 31
December:
GBPm 2022 2021
------------------------------------------ ----- -----
Lease liabilities recognised at 1 January 17.1 17.5
Additions 0.1 1.5
Disposals (6.3) -
Interest charge 0.6 0.8
Payments made on lease liabilities (2.2) (2.7)
------------------------------------------ ----- -----
At 31 December 9.3 17.1
------------------------------------------ ----- -----
Additions to lease liabilities include extensions to existing
lease agreements. Refer to note 32.3 for more information on the
disposal. Total lease payments in 2022 were GBP2.4m (2021:
GBP2.9m).
Below is the maturity analysis of the lease liabilities:
GBPm 2022 2021
-------------------------------- ----- -----
Non-current 8.0 15.2
Current 1.3 1.9
-------------------------------- ----- -----
Total lease liabilities 9.3 17.1
-------------------------------- ----- -----
No later than one year 1.8 2.7
Between one year and five years 6.2 10.1
Later than five years 2.9 7.5
-------------------------------- ----- -----
Total future lease payments 10.9 20.3
-------------------------------- ----- -----
Total future interest payments (1.6) (3.2)
-------------------------------- ----- -----
Total lease liabilities 9.3 17.1
-------------------------------- ----- -----
The Group's net debt is made up of cash and cash equivalents and
lease liabilities. The movement during the year in lease
liabilities is set out above. Movements in cash and cash
equivalents are set out in the Cash flow statement. These are the
only changes in liabilities arising from financing activities in
the year.
25. Provision for other liabilities
GBPm
----------------------- -----
At 1 January 2021 1.4
Provided in the period 0.7
Utilised in the period (0.1)
Released in the period (0.6)
----------------------- -----
At 31 December 2021 1.4
----------------------- -----
Provided in the period 0.3
Utilised in the period (0.3)
Released in the period (0.5)
----------------------- -----
At 31 December 2022 0.9
----------------------- -----
Provisions for other liabilities comprise amounts for office
dilapidations, employer taxes on share-based payments and legal
matters. It is expected that these will be utilised by as follows:
GBP0.2m in 2030 and GBP0.7m over various years.
26. Share capital
2022 2021
----------------- -----------------
Issued and fully paid Shares GBPm Shares GBPm
---------------------------- ----------- ---- ----------- ----
Ordinary shares - 0.1 pence 300,000,000 0.3 300,000,000 0.3
---------------------------- ----------- ---- ----------- ----
Balance as at 31 December 300,000,000 0.3 300,000,000 0.3
---------------------------- ----------- ---- ----------- ----
No additional shares have been issued or cancelled in the year
ended 31 December 2022.
27. Translation reserve
GBPm 2022 2021
------------------------------------- ---- -----
At 1 January - 0.1
Currency translation of subsidiaries 0.4 (0.1)
------------------------------------- ---- -----
At 31 December 0.4 -
------------------------------------- ---- -----
28. Own shares
GBPm 2022 2021
----------------------------------- ----- -----
Balance at 1 January 3.4 -
Acquired in the year 5.6 4.6
Distributed on exercise of options (1.5) (1.2)
----------------------------------- ----- -----
Balance at 31 December 7.5 3.4
----------------------------------- ----- -----
On 18 January 2022 the Group announced the launch of a share
buyback programme. Refer to the Company website for more
details.
The own shares reserve represents the cost of shares in Alfa
Financial Software Holdings PLC that have been:
Purchased in the market 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 31 December 2022 were 2,163,952 (2021:
2,590,260); and
Purchased in the market 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 31 December 2022 were 2,832,073 (2021:
nil).
Own shares distributed relate to shares distributed to employees
from the employee benefit trust for bonus awards under share
schemes. As at 31 December 2022, the Group held 1.67% (2021: 0.86%)
of its own called-up share capital.
29. Share awards
The Group recognised total expenses relating to share-based
payment of GBP1.8m (2021: GBP1.5m) in the current year. Of this,
GBP1.6m (2021: GBP1.5m) relates to equity-settled LTIP schemes and
GBP0.2m (2021: GBP0.0) relates to Employee Share Save schemes. See
further detail below. The outstanding share schemes are made up of
the following:
Share options Share options
Vesting Exercise 31 December 31 December
Grant date Condition Type Plan date price 2022 2021
----------- --------------- ------------ ----------- -------- ------------- -------------
November November
2019 Service Only LTIP 2022 0p - 1,113,909
Service and
June 2020 Performance LTIP June 2023 0p 2,322,473 2,322,473
Service and
April 2021 Performance LTIP April 2024 0p 1,070,668 1,121,104
November October
2021 Service Only LTIP 2024 0p 60,872 60,872
November UK Employee January
2021 Service Only ShareSave 2025 153.6p 397,228 774,659
November US Employee January
2021 Service Only ShareSave 2024 167.0p 70,515 77,724
Service and
April 2022 Performance LTIP April 2025 0p 741,162 -
April 2022 Service Only LTIP April 2025 0p 237,965 -
US Employee December
April 2022 Service Only ShareSave 2024 141.1p 36,731 -
UK Employee December
May 2022 Service Only ShareSave 2025 132.8p 530,320 -
September September
2022 Service Only LTIP 2025 0p 5,917 -
----------- --------------- ------------ ----------- -------- ------------- -------------
The weighted average share price at the date of exercise for
share options exercised during the period was 150.0p (2021:
130.4p). The options outstanding at 31 December 2022 had a weighted
average exercise price of 27.1p (2021: 24.1p), and a weighted
average remaining contractual life of 1.2 years (2021: 1.7 years).
The opening weighted average exercise price at 1 January 2022 was
24.1p (1 January 2021: nil). The weighted average exercise price of
options forfeited and exercised during the year was 128.5p (31
December 2021: nil).
The expected price volatility is based on the historical
volatility adjusted for any expected changes to future volatility
due to publicly available information.
The total share-based payment charge relating to Alfa Financial
Software Holdings PLC shares for the year is split as follows:
GBPm 2022 2021
----------------------------------------------------- ---- ----
Employee share schemes - value of services 1.5 1.1
Expense in relation to fair value of social security
liability on employee share schemes 0.3 0.4
----------------------------------------------------- ---- ----
Total cost of employee share schemes 1.8 1.5
----------------------------------------------------- ---- ----
Details of the share options outstanding during the year are as
follows:
2022 2021
----------------------------------- ----------- -----------
Outstanding at 1 January 5,470,741 6,139,161
Conditionally awarded in year 1,552,095 2,034,359
Exercised (1,032,382) (2,575,681)
Forfeited or expired in year (516,603) (127,098)
----------------------------------- ----------- -----------
Outstanding at 31 December 5,473,851 5,470,741
----------------------------------- ----------- -----------
Exercisable at the end of the year - -
----------------------------------- ----------- -----------
29.1 LTIPs
The 2019 November LTIP awards vested during the year. The
exercise of these awards had a net impact of GBP0.4m on own shares
and GBP1.3m on retained earnings.
The 2020 June LTIP and 2021 April LTIP awards (service and
performance conditions) are conditional on performance conditions,
50% based on EPS performance (non-market condition) and 50% on TSR
(market condition) as well as a three-year employment fulfilment.
The fair value of these awards has been determined using the Monte
Carlo model / Black Scholes model at the grant date.
The 2021 November LTIP awards are conditional on employment
only. The fair value of these awards is equal to the closing share
price on the date of grant, discounted by the expected 12-month
dividend yield to reflect the lack of dividend accrual over the
vesting period (three years). The expected price volatility is
based on the historic volatility (based on the remaining life of
the scheme), adjusted for any expected changes to future volatility
due to publicly available information.
The 2022 April LTIP awards (service and performance conditions
plan) are granted conditional on performance conditions, 50% based
on EPS performance (non-market condition) and 50% on TSR (market
condition) as well as a three-year employment fulfilment. For those
share schemes with market-related vesting conditions, the fair
value has been determined using the Black Scholes at the grant
date. For share options issued with EPS (non-market) performance
vesting conditions, the fair value of the underlying option is
equal to the grant date share price. The following table lists the
inputs to the model used for the awards granted in the year ended
31 December 2022 based on information at the date of grant:
LTIP awards (granted in April) TSR element EPS element
------------------------------- ----------- -----------
Share price at date of grant 164p 164p
Award price 0p 0p
Volatility 57.8% 0.0%
Embedded TSR 13.9% -
Average correlation 39.3% -
Life of award 3 years 3 years
Risk-free rate 1.53% -
Fair value per award 88p 147p
------------------------------- ----------- -----------
In April and September 2022, the Group awarded to certain
employees a LTIP conditional on employment only. The fair value of
these awards on the date of grant is 147p, discounted by the
expected 12-month dividend yield to reflect the lack of dividend
accrual over the vesting period (three years).
All of these Company schemes, as well as any non-cyclical
awards, are equity-settled by award of ordinary shares.
29.2 Employee ShareSave Scheme
The Group has in place an Employee ShareSave Scheme - the Save
As You Earn (SAYE) scheme in the UK and Employee Stock Purchase
Plan (ESPP) scheme in the US. The scheme started in 2021 but there
were new grants in 2022 as well. Under these schemes, eligible
employees can save up to a set limit each month. At the end of the
savings period (three years for SAYE and two years for ESPP),
employees can choose whether or not they wish to buy the shares at
the option price or take back their savings as cash. The option
price is the share price at the start of the plan with a 20%
discount for the UK scheme and 15% discount for the US scheme. The
fair value of these awards have been determined using the Black
Scholes model at the grant date.
31 December 2022
--------------------------------------------------
SAYE ESPP
------------------------ ------------------------
Number of Exercise Number of Exercise
share options price share options price
-------------------------------- -------------- -------- -------------- --------
Outstanding at beginning of
year 774,659 154p 77,724 167p
Conditionally awarded in year 530,020 138p 36,731 141p
Forfeited or expired in year (243,732) 154p (7,209) 167p
Replaced in year (i.e. left
the 2021 plan to join the 2022
plan) (133,699) 154p - -
-------------------------------- -------------- -------- -------------- --------
Outstanding at the end of the
year* 927,548 145p 107,246 158p
-------------------------------- -------------- -------- -------------- --------
Exercisable at the end of the
year - - - -
-------------------------------- -------------- -------- -------------- --------
* The exercise price is a weighted average.
The inputs used in the calculation of the fair value of options
granted in the year were as follows:
SAYE ESPP
31 December 31 December
2022 2022
------------------------- ------------ ------------
Share price 184p 164p
Exercise price 138p 141p
Expected volatility 56.8% 58.5%
Expected life 36 months 24 months
Risk-free rate 1.67% 1.51%
Expected dividend yields 3.40% 3.40%
------------------------- ------------ ------------
30. Unrecognised items
30.1 Contingencies and commitments
The Group has no capital commitments, no material contingent
liabilities and no contingent assets.
30.2 Events occurring after the reporting period
As part of the share buyback programme, the Company has acquired
shares in Alfa Financial Software Holdings PLC in the period
between 1 January 2023 and 1 March 2023. See
alfasystems.com/investors. There have been no other reportable
subsequent events.
31. Dividends
A 2021 ordinary dividend of 1.1 pence per share was paid on 24
June 2022 amounting to GBP3.3m (2021: GBP3.0m).
A special dividend of 3.0 pence per share was paid on 16 June
2022 amounting to GBP8.9m (2021: GBP29.7m).
A 2022 special dividend of 3.5 pence per share was paid on 7
October 2022 amounting to GBP10.3m (2021: GBPnil).
Subject to approval at the Annual General Meeting on 26 April
2023, a 2022 final dividend of 1.2 pence per share will be paid on
26 June 2023 to holders on the register on 26 May 2023. The
ordinary shares will be quoted ex-dividend on 25 May 2023. In
addition, the Board has decided to declare a special dividend of
1.5 pence per share, with an ex-dividend date of 13 April 2023, a
record date of 14 April 2023 and a payment date of 9 May 2023.
32. Related parties
32.1 Controlling shareholder
The ultimate parent undertaking is CHP Software and Consulting
Limited (the 'Ultimate Parent'), which is the ultimate parent
undertaking of the smallest and largest group in relation to these
consolidated financial statements. The ultimate controlling party
is Andrew Page.
32.2 Basis of consolidation
The principal subsidiaries and joint ventures of the Group and
the Group percentage of equity capital are set out below. All these
are consolidated within the Group's financial statements.
Held Held
Held by Held by
Registered address Principal by Company Group by Company Group
and country of incorporation activity 2022 2022 2021 2021
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Alfa Financial Moor Place, 1 Fore
Software Group Street Avenue, London, Holding
Limited EC2Y 9DT, UK company 100% 100% 100% 100%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Moor Place, 1 Fore
Alfa Financial Street Avenue, London, Software
Software Limited EC2Y 9DT, UK and services - 100% - 100%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
124 E Hudson Ave,
Alfa Financial Royal Oak, MI 48067, Software
Software Inc United States and services - 100% - 100%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Lisgar House, Level
3, 32 Carrington
Alfa Financial Street,
Software Australia Sydney, NSW, 2000,
Pty Limited Australia Services - 100% - 100%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Level 1 Building
B, 600 Great South
Road, Greenlane,
Alfa Financial Auckland 1051, New
Software NZ Limited Zealand Services - 100% - 100%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Bockenheimer Landstraße
Alfa Financial 20, 60323 Frankfurt Software
Software GmbH am Main, Germany and services - 100% - 100%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Alfa Financial Moor Place, 1 Fore
Software International Street Avenue, London, Software
Limited EC2Y 9DT, UK and services - 100% - -
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Moor Place, 1 Fore
Street Avenue, London, Software
Alfa iQ EC2Y 9DT, UK and services - 51% - 51%
------------------------ ------------------------------ -------------- ----------- ------ ----------- ------
Alfa Financial Software International Limited was established in
February 2022.
32.3 Transactions with related parties
See note 8 for further detail on remuneration of key management
(including Directors).
Dividends to the amount of GBP15.0m were paid to the Ultimate
Parent (2021: GBP21.7m).
Dividends of 3 pence, 1.1 pence and 3.5 pence per share were
paid to all shareholders in 2022 (2021: 1 pence and 10 pence per
share). Directors and other key management received dividends based
on their beneficial interest in the shares of the Company.
The balances outstanding from the Ultimate Parent at 31 December
2022 and 2021 were GBPnil and GBPnil respectively.
In 2020 the Group invested GBP0.4m in Alfa IQ consisting of: a
capital contribution of GBP0.3m; and an interest-free loan fair
valued at GBP0.1m. At 31 December 2022 the value of the investment
is carried at GBP0.1m (2021: GBP0.2m) and the loan fair valued at
GBP0.1m (2021: GBP0.1m).
On 9 February 2022, the Company entered into a short-term rental
agreement with the Ultimate Parent for rental of the 9th Floor of
Moor Place. The resulting rental income for 2022 was GBP0.4m (2021:
GBPnil).
The Company also received rental income of GBP3,718 (2021:
GBP34,610) in the year relating to its prior arrangement with the
Ultimate Parent for the rental of a meeting room on the 9th Floor
of Moor Place.
On 29 July 2022 the Group reached an agreement for the
assignment of its lease to the 9th floor of Moor Place, 1 Fore
Street Avenue, London to the Ultimate Parent. There is no
consideration for the transaction, with the Ultimate Parent taking
on all the rights and liabilities for the 9th floor from Alfa. The
assignment of the lease resulted in the de-recognition of the right
to use asset and lease liability, which resulted in a one-off gain
of GBP0.6m which was fully recognised in the year.
There were no other outstanding receivable balances from related
parties at the end of the reporting period.
33. Offsetting assets and liabilities
Assets and liabilities are offset and the net amount is reported
in the consolidated statement of financial position where Alfa
currently has a legally enforceable right to offset the recognised
amounts, and there is an intention to realise the asset and settle
the liability simultaneously.
The following table presents the recognised assets and
liabilities that are offset as at 31 December 2022 and 31 December
2021 in the consolidated statement of financial position.
31 December 2022 Gross Amounts Net amounts
GBPm amounts offset presented
---------------------------------------- -------- ------- -----------
Accrued income 15.6 (9.1) 6.5
Contract liabilities - deferred licence (17.7) 9.1 (8.6)
---------------------------------------- -------- ------- -----------
31 December 2021 Gross Amounts Net amounts
GBPm amounts offset presented
---------------------------------------- -------- ------- -----------
Accrued income 14.0 (7.7) 6.3
Contract liabilities - deferred licence (13.0) 7.7 (5.3)
---------------------------------------- -------- ------- -----------
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties which could have a
material impact on the long-term performance of Alfa Financial
Software Holdings PLC and its subsidiaries are set out in our 2021
Annual Report available on our website. In our 2022 Annual Report
the following risks have been added or removed:
Risks removed:
- High customer concentration
- Pandemic outbreak in Alfa and/or customer geographies
Risks added:
- Pressure on Margin due to increased cost base or through increased competition
- Foreign exchange rate uncertainty
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The responsibility statement below has been prepared in
connection with the annual report and financial statements for the
year ended 31 December 2022. Certain parts thereof are not included
within this Preliminary Announcement. The Directors confirm that to
the best of their knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
- the strategic report, contained within the annual report and
financial statements for the year ended 31 December 2022, includes
a fair review of the development and performance of the business
and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Alfa
Financial Software Holdings PLC websites. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
This responsibility statement was approved by the Board of
Directors and is signed on its behalf by:
Andrew Denton
Chief Executive Officer
1 March 2023
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