TIDMALFA
RNS Number : 8678K
Alfa Financial Software Hldgs PLC
31 August 2023
31 August 2023
Alfa Financial Software Holdings PLC
2023 Half Year Report
Strong first half, full year expectations reiterated
Alfa Financial Software Holdings PLC ("Alfa" or the "Company"),
a leading developer of software for the asset finance industry,
today publishes its unaudited results for the six months ended 30
June 2023 ("the period").
Financial summary
Results H1 2023 H1 2022 Movement
GBPm, unless otherwise stated Unaudited Unaudited %
------------------------------- ----------- ------------ ---------
Revenue 52.9 43.9 21%
Operating profit 16.9 14.2 19%
Profit before tax 16.6 13.8 20%
Earnings per share - basic
(pence) 4.52 3.92 15%
Earnings per share - diluted
(pence) 4.45 3.85 16%
Special dividend declared per
share (pence) 4.0 3.5 14%
H1 2023 31 Dec 2022 Movement
GBPm Unaudited Audited %
------------------------------- ----------- ------------ ---------
Cash 26.3 18.7 41%
Key measures (1) H1 2023 H1 2022 Movement
GBPm, unless otherwise stated Unaudited Unaudited %
------------------------------------- ---------- ---------- ---------
Revenue - constant currency 52.9 45.0 18%
Cash generated from operations 26.2 17.8 47%
Operating free cash flow conversion
(%) 140% 112% 28%
Total Contract Value (TCV) 138 138 0%
(1) See definitions section for further information regarding
calculation of measures not defined by IFRS.
Financial highlights
-- Revenue up 21% versus H1 2022, 18% at constant currency
--
-- Subscription revenues up 14%, supported by hosting up 33%
-- Software revenues up 33% driven by high customer funded development in the half
-- Services up 21% with increased headcount and strong chargeability
-- Operating profit up 19% on H1 2022 as the business maintains investment in the future
-- Continued strong cash generation at 140%
-- Robust balance sheet position with GBP26.3m of cash and no bank debt
-- Special dividend of 4.0 pence per share (GBP11.8m) declared
Strategic highlights
-- Diversified customer base. Top five customers make up 36% of revenues in H1 2023 compared with 64% four years ago
-- Eighteen customers contributing revenue over GBP1m in the period compared with seven four years ago
-- Strong pipeline, working with 11 customers in late-stage pipeline and in at least preferred supplier status with
10 customers overall
-- TCV of GBP138m in line with 2022 H1
-- Strong software delivery and Cloud Hosting performance
-- Expansion of partner program in the US
-- Continued investment in people and product for future growth
-- Retention running at 95%
-- Emission reduction targets validated by SBTi and commitment to Net Zero by 2050.
Outlook
Whilst the market need for new software remains strong, we
remain conscious of the uncertain economic outlook. We have built a
resilient business with reduced customer concentration, operating
across diverse markets both geographically and by asset class. The
business is supported by a growing subscription revenue base, new
business demand remains strong and buying behaviour is unchanged.
We had a strong first half which was underpinned by a very good
performance in Software. Looking into the second half, we will
increase our investment in the software to ensure we stay in line
with our full year product roadmap plans. As a consequence, our
full year expectations remain unchanged.
Andrew Denton, Chief Executive Officer
"We have remained focused on operational excellence and
delivering our strategy and this is demonstrated by the very strong
results we have produced in the first half of 2023. Our high level
of customer funded development, weighted more towards the first
half this year, helped fuel strong growth for the period along with
the growth in the team. We remain confident in our ability to
convert our exceptionally strong pipeline into new customers with a
number of sizeable contracts to execute over the Autumn. This
alongside the inherent robustness of the asset finance software
market and our continued investment in high-quality people,
underpins our strong confidence in the outlook for the
business."
Enquiries
Alfa Financial Software Holdings
PLC +44 (0)20 7588 1800
Andrew Denton, Chief Executive
Officer
Duncan Magrath, Chief Financial
Officer
Andrew Page, Executive Chairman
Teneo +44 (0)20 7353 4200
James Macey White
Ed Cropley
Barclays +44 (0)20 7623 2323
Robert Mayhew
Tom MacDonald
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@teneo.com
. Please dial in at least 10 minutes prior to the start time.
An archived webcast of the call will be available on the
Investors page of the Company's website
https://www.alfasystems.com/en-eu/investors
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 38 countries. Alfa has offices
in Europe, Australasia and North America. For more information,
visit www.alfasystems.com .
Forward-looking statements
This Half Year Report (HYR) has been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. The
HYR should not be relied on by any other party or for any other
purpose. This report contains certain forward-looking statements.
All statements other than statements of historical fact are
forward-looking statements. These include statements regarding
Alfa's intentions, beliefs or current expectations, and those of
our officers, directors and employees, concerning (without
limitation), with respect to the financial condition, results of
operations, liquidity, prospects, growth, strategies and businesses
of Alfa. These statements and forecasts involve known and unknown
risks, uncertainty and assumptions because they relate to events
and depend upon circumstances that will or may occur in the future
and should therefore be treated with caution. There are a number of
factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. These forward-looking statements are made only as at
the date of this announcement. Nothing in this announcement should
be construed as a profit forecast. Except as required by applicable
law, Alfa disclaims any obligation or undertaking to update the
forward-looking statements or to correct any inaccuracies therein,
or to keep current any other information contained in the HYR.
Accordingly, reliance should not be placed on any forward-looking
statements.
BUSINESS REVIEW
Strong first half performance
In the first half of 2023 we have remained focused on continuing
to drive the business forward with good progress across all areas
of our business along with strong financial performance. One of our
differentiators is the quality of our delivery record and this has
continued with fourteen delivery events in the first half. We have
also continued to develop and enhance our software in advance of
the launch of the sixth version of our software later in the
year.
Financial performance in the first half was strong, in
particular in Software, with revenue up 21% to GBP52.9m (H1 2022:
GBP43.9m) with growth across all revenue streams. Operating profit
performance was also strong, up 19% to GBP16.9m (H1 2022:
GBP14.2m). Cash conversion was also very good at 140% (2022: 112%)
and we finished the period with net cash of GBP26.3m (31 Dec 2022:
GBP18.7m).
The very strong revenue performance we have seen in the first
half, particularly with the first half weighting of customer funded
development has meant that we have delivered a lot of our
contracted work for customers. This has been reflected in our Total
Contract Value ("TCV") which at GBP138m is in line with this time
last year with increased Subscription TCV being offset by
reductions in both Services and Software TCV. As yet our TCV does
not include the three prospects in our late-stage pipeline that we
are currently working with as we finalise commercial contracts. If
these commercial contracts had been finalised at 30 June 2023, it
would have increased overall TCV by cGBP30m and in particular the
Services TCV would have been up 35% from this time last year.
We had eighteen customers contributing revenues of more than
GBP1m in the period, up from fifteen last year and seven in H1 2019
and over the last four years we have significantly reduced our
customer concentration, with our top five customers now
representing 36% of our revenues in H1 2023, compared with 64% in
H1 2019.
2022 was a year of strong recruitment, especially as the year
progressed, and as a consequence we expected a lower level of
recruitment in 2023 partly due to the improving retention trend but
also to ensure the quality of the experience for new joiners as we
consolidate experience levels within the team as a whole. Retention
at 30 June 2023 was 95% (H1 2022: 85%) with a headcount at 30 June
2023 of 462 (H1 2022: 417). Average headcount in the period of 453
(2022 H1: 399) was a 14% increase on last year. We anticipate that
by the year end total headcount and average headcount will be up
c10% over last year.
Strategic progress and Net Zero commitment
Alfa is a leading asset finance software company with global
scale. Our platform, Alfa Systems, is the world's leading asset
finance software, and has been supporting some of the world's
largest and most innovative companies for more than 30 years.
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 product more efficiently. We will have a
big company impact, but a small company feel.
Our strategic priorities are to:
-- Strengthen - grow our differentiation of market leading People, Product & Delivery
-- Sell - focus on cloud-hosted subscription sales
-- Scale - increase our capacity for developing and delivering Alfa Systems
-- Simplify - simplify our product and implementations
-- Synergise - develop our partner ecosystem
-- Start - improve our Alfa Start offering for smaller asset finance providers
We have continued to make good progress in all these areas in
2023, with the key areas highlighted below, but of particular
significance is that we have had our emission reduction targets
validated by the Science Based Target Initiative (SBTi). We have
committed to reducing our Scope 1 and Scope 2 emissions by 42% by
2030, along with a commitment to Net Zero by 2050. This submission
is an important milestone in our journey, six years on from our
Environmental Impact community being created.
Subscription - Strong growth in revenues
Subscription revenues arise from recurring revenues from
subscription licences, hosting and maintenance.
Subscription revenues continued to grow strongly in the period,
up 14%.
We have a cloud first approach to sales as we see real benefits
in both the speed of implementation for customers and the
reliability of the service and built-in tools, including automated
monitoring, patching and scheduling, that our hosting service
provides. We anticipate that the majority of new customers will
choose a hosted service and in the late stage pipeline all
customers except one are looking to acquire a subscription licence.
We have eight customers using Cloud Hosting services for their live
production environments and have another six customers taking
hosting services during the design and implementation phase, most
of which are expected to become live production customers.
Our hosted services are ISO 27001 and ISO 27018 certified and
SOC1 and SOC2 audited to confirm compliance with controls around
data security and availability. Given the mission critical nature
of our systems to our customers, having such third party
verification of our compliance with these standards is a key
selling point.
Software - Strong growth in customer funded development
revenues
Software revenues arise from development work for new and
existing customers, along with perpetual licence recognition.
Software revenue was up 33% on H1 2022. This was largely driven
by the significant increase in customer funded development days
which increased 31% over last year. Over a typical year about half
of our engineering time is spent on chargeable work, with the
balance on self-funded development along with fixing and support
work. This strong first half has enabled more time for self-funded
development in H2. The resource flexes between these areas
depending on priorities, with Lisbon now supporting our London
based engineering team. In 2022 the customer funded development was
weighted towards the second half whereas in 2023 this has been more
focused towards the first half and we expect more self-funded
development in the second half.
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 and we
continue to invest to increase that lead, both through a balance of
customer funded development and self-funded development.
We release an upgrade every 4 weeks and periodically we release
a new version of Alfa Systems which highlights the step change
functional and technical advancement that has been made since the
last version. During the first half we have made progress in
several eye-catching new areas, such as Alfa Compose and
Environmental Accounting, which will be headline items for our next
major version release, the sixth since Alfa was formed 33 years
ago, due to be announced in the autumn of 2023.
Services - High quality Services and expansion of partnership
programmes
Services revenues arise from work on implementations and other
services.
Overall Services revenue was up 21% on the prior period with
very strong chargeability, particularly in Europe. We continue to
implement a number of v4 to v5 upgrades, and these accounted for
17% of total services revenues. Other work for existing customers
accounted for 50% of our services revenues with the balance of 33%
from new implementations. There are fourteen new implementations
and v5 upgrades ongoing of which we expect five to go-live in the
next six months, one of which one has already occurred in July. We
expect lower chargeability in the second half as we transition
people across from the projects coming to an end to the new large
prospects that will be starting up.
We had two initial go-lives for customers in the period, one in
America for automotive finance and an Alfa Start project in the UK.
In addition, we had a customer go-live in a new country, Mexico,
increasing the total number of countries where we are live to 38.
Shortly after the period end we went live with our first African
commercial asset finance portfolio, just over two years after we
went live with the customer's retail portfolio, and also went live
with the initial phase of a v4 to v5 project for a long-standing UK
customer.
Increasing our use of partners is a key element of our
longer-term strategy for increasing the number of implementations
we can deliver and providing us with a more flexible implementation
resource. Our program is well developed in Europe and now we have
two partners in the US supporting us on two different client
projects. At the moment partners augment our existing resources on
projects, but very much work under our direction. We continue to
work towards setting up the training, processes and tooling that
would allow partners to lead on implementations whilst ensuring our
excellent delivery reputation.
Alfa iQ - gaining traction
As industry interest in AI continues to build, we seek to
investigate further ways in which we can deliver value to the asset
finance industry through the use of AI. With an existing key
customer looking to greatly expand their usage of Alfa iQ in credit
risk exposure and others showing significant interest in the
workflow integrations, we look to continue building on the strong
base of products and modelling techniques that we have
demonstrated.
Strong engagement with our people
We have continued to ensure timely and clear communications with
our employees and are delighted to see that our retention rates
have improved and now sit at 95%. We are focusing a lot of
resources on enhancing our training programs not only for technical
matters but also to support developing our leaders of the future
and have integrated into our internal systems a diverse library of
on-line training content.
We have settled into a post-Covid working pattern, making the
most of in person events to maintain the culture whilst also being
thoughtful on our travel and the emissions footprint that this
generates. We continue to assess the ways we work to ensure that
they work for both the individual and for the team as a whole.
Capital return
We remain a strongly cash generative business, with 140% cash
conversion in H1 2023. We continue to generate more cash than we
need for our growth plans and are committed to returning excess
cash to shareholders.
Our main mechanism for returning capital is the payment of a
regular dividend, and our policy is to grow this progressively as
our profits grow. We paid the 2022 final dividend of 1.2p per share
amounting to GBP3.5m in the first half.
We have also made one-off returns of capital through special
dividends. In the first half we paid a special dividend of 1.5p per
share or GBP4.4m. This took total special dividend payments over
the last three years to 33p or GBP98m.
In addition to the dividend payments, we announced in January
2022 an eighteen month share buyback programme which came to an end
on 30 June 2023. In H1 2023 we purchased 1.9m shares at a cost of
GBP3.1m. This took total purchases since the program started to
4.8m shares at cost of GBP7.7m. All the purchased shares are
currently held in treasury.
Having executed this share buyback programme, we currently
believe the quickest and simplest mechanism for returning cash to
shareholders is via Special Dividends, but we will keep under
review whether another Share Buyback program should be
launched.
Even after returning cash in the period of GBP11.0m, we finished
the period with a strong balance sheet with net cash of GBP26.3m
and expect this to continue to grow. As a consequence, the Board
has decided to declare a special dividend of 4.0 pence per share,
with an ex-dividend date of 14 September 2023, a record date of 15
September 2023 and a payment date of 6 October 2023. The special
dividend would amount to a total payment of GBP11.8m.
Steady market conditions
The macro-economic outlook remains uncertain at the moment, with
high levels of inflation and higher levels of interest rates trying
to reduce it. Alfa Systems is now operational in 38 countries; in
automotive finance, equipment finance and wholesale and loan
finance; for OEMs, banks and independents and across all asset
classes. The breadth and diversity of Alfa's business interests
help to insulate us from economic uncertainty in individual
geographies and sectors of our business.
Along with Alfa's diverse revenue sources providing insulation
against the current economic uncertainty, the market itself
provides some protection. The asset finance market is a more secure
form of lending and it has a history of gaining market share in
uncertain times compared with non-asset backed lending markets
although it is unlikely to be completely immune to these economic
pressures. 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 more flexible modern systems.
We believe that the asset finance software market will remain
robust. New business demand remains strong and buying behaviour is
unchanged from this time last year. With our functional, flexible,
modern, cloud-native system, we continue to be well positioned to
capitalise on that end market demand.
Strong pipeline
We continue to see strength in the late-stage pipeline with some
very large prospects in both Europe and the US. If we convert
these, they could provide not only large initial projects, but with
the prospects of a very large tail of follow-on work. In total we
have 11 prospects in the late stage of which five are at preferred
supplier status and five where we are already working on
implementations as we finalise commercial contracts. We also
continue to see new prospects coming into the early-stage pipeline
showing that the buying dynamics of the market remain unchanged. It
was also pleasing to see the speed at which we won an Alfa Start
project and started to implement. This is in line with an overall
high decision and execution cadence in sales during the half.
Overall we remain confident in both the demand for our software
and our ability to win work in the market.
Outlook
Whilst the market need for new software remains strong, we
remain conscious of the uncertain economic outlook. We have built a
resilient business with reduced customer concentration, operating
across diverse markets both geographically and by asset class. The
business is supported by a growing subscription revenue base, new
business demand remains strong and buying behaviour is unchanged.
We had a strong first half which was underpinned by a very good
performance in Software. Looking into the second half, we will
increase our investment in the software to ensure we stay in line
with our full year product roadmap plans. As a consequence, our
full year expectations remain unchanged.
FINANCIAL REVIEW
Financial results
H1 2023 H1 2022 Movement
GBPm Unaudited Unaudited %
----------------------- ----------- ----------- ---------
Revenue 52.9 43.9 21%
----------------------- ----------- ----------- ---------
Gross profit 33.7 28.3 19%
----------------------- ----------- ----------- ---------
Operating profit 16.9 14.2 19%
----------------------- ----------- ----------- ---------
Profit before tax 16.6 13.8 20%
----------------------- ----------- ----------- ---------
Taxation (3.3) (2.2) 55%
----------------------- ----------- ----------- ---------
Profit for the period 13.3 11.6 15%
----------------------- ----------- ----------- ---------
Revenues increased by 21% or GBP9.0m to GBP52.9m in the six
months ended 30 June 2023 (H1 2022: GBP43.9m). Growth at constant
currency was 18%.
Gross profit increased 19% to GBP33.7m (H1 2022: GBP28.3m)
slightly behind the increase in revenue mainly due to increased
headcount and salary inflation, with operating profit increasing by
19% or GBP2.7m to GBP16.9m (H1 2022: GBP14.2m) with profit before
tax of GBP16.6m (H1 2022: GBP13.8m).
The Effective Tax Rate ("ETR") for the 2023 half year is 19.9%
(H1 2022: 15.9%), the increase being principally due to the
increase in the UK Corporation tax rate from 19% to 23.5% for 2023
(which rises to 25% for a full year in 2024). For the full year
2023 we expect the ETR to be around 20% (2022: 15.2%). Profit for
the period was GBP13.3m (H1 2022: GBP11.6m).
Revenue
Revenue - by type H1 2023 H1 2022 Movement
GBPm Unaudited Unaudited %
------------------- ---------- ---------- ---------
Subscription 15.4 13.5 14%
Software 8.9 6.7 33%
Services 28.6 23.7 21%
------------------- ---------- ---------- ---------
Total revenue 52.9 43.9 21%
------------------- ---------- ---------- ---------
Subscription revenues
Overall subscription revenues increased strongly by 14% to
GBP15.4m (2022 H1: GBP13.5m) with growth across all three elements
of licence, maintenance and hosting driven from both existing and
new customers. Nearly all customers in the late stage pipeline are
looking for a subscription licence contract, with the majority
looking for hosting as well.
Software revenues
Software revenues of GBP8.9m were up GBP2.2m or 33% on last year
(H1 2022: GBP6.7m), driven by 31% growth in customer-funded
development days. In contrast to last year when the development
days were weighted to the second half of the year, this year they
will be more weighted towards the first half.
There were one-off licence revenues of GBP0.3m (H1 2022:
GBP0.2m) and revenue recognition from perpetual licence sales in
previous years was in line with last year.
Services revenues
Total Services revenues increased by 21% to GBP28.6m (H1 2022:
GBP23.7m) at actual exchange rates. New implementation revenues
were broadly in line with last year, with growth largely coming
from existing customers either going through v4 to v5 upgrades
(which accounted for 17% of total services work versus 14% last
year) or ongoing services work.
Total Contract Value (TCV)
TCV - by type (unaudited) 2023 2022 2022
GBPm H1 FY HY
------------------------------ ----- ----- -----
Subscription 102 93 89
Software 15 20 18
Services 21 30 31
------------------------------ ----- ----- -----
Total TCV 138 143 138
------------------------------ ----- ----- -----
Definition of TCV is included in the definitions section of this
Half Year Report
Total contract value (TCV) at 30 June 2023 was GBP138m (31
December 2022: GBP143m, 30 June 2022: GBP138m). Strong growth in
subscription TCV was offset by reductions in Software and Services
TCV along with a negative impact from currency which accounted for
GBP2m of the GBP5m overall reduction. Services and Software TCV
will increase once we have contracted with a number of prospects in
the late-stage pipeline. At the moment we estimate that if we had
signed three of the contracts that we are currently working with,
TCV at 30 June 2023 would have been GBP30m higher.
Of the TCV at 30 June 2023, GBP60m (H1 2022: GBP60m) is
currently anticipated to convert into revenue within the next 12
months, assuming contracts continue as expected and are not delayed
or cancelled. This includes GBP6m (H1 2022: GBP8m) of Software
revenues, GBP33m (H1 2022: GBP29m) of Subscription revenues and
GBP21m (H2 2022: GBP23m) of Services revenues.
Operating profit
The Group's operating profit increased by GBP2.7m, or 19%, to
GBP16.9m in H1 2023 (H1 2022: GBP14.2m) primarily reflecting the
21% increase in revenue.
Headcount numbers were up 11% at 30 June 2023 at 462 (H1 2022:
417), with average headcount of 453 up 14% on last year (H1 2022:
399). Staff retention rate has progressively improved since the
middle of 2022 and now stands at 95% on a 12 month basis, and this
is up from 85% at 30 June 2022.
Expenses - net H1 2023 H1 2022 Movement
GBPm Unaudited Unaudited %
----------------------------------- ---------- ---------- ---------
Cost of sales 19.2 15.6 23%
Sales, general and administrative
expenses 17.0 14.6 16%
Other income (0.2) (0.5) (60)%
----------------------------------- ---------- ---------- ---------
Total expenses - net 36.0 29.7 21%
----------------------------------- ---------- ---------- ---------
Cost of sales increased by GBP3.6m to GBP19.2m (H1 2022:
GBP15.6m) to support the growth in the business. This was due to
higher headcount and salary costs along with increased hosting
costs from the increasing scale of that business along with the
negative impact of exchange rates.
Sales, general and administrative (SG&A) increased to
GBP17.0m in the six month period to 30 June 2023 (H1 2022:
GBP14.6m). This included GBP0.5m of one-off costs associated with
the possible offer for Alfa, without which they would have been up
13%. Salary costs were up 7% in the period to GBP6.4m (2022 H1:
GBP6.0m). Profit Share Pay, including employer's costs, in the
period was GBP2.1m (2022 H1: GBP1.6m) because of higher profits.
Share-based payment charges have increased over last year at
GBP0.9m (H1 2022: GBP0.8m), principally due to increased provision
for NI costs on the back of the increased share price. Foreign
currency gains of GBP0.1m, were down from the gain of GBP0.6m last
year. Travel and conference costs were broadly in line with last
year, however we do expect these to increase in the second half of
the year. Other costs totalling GBP7.4m increased GBP0.6m on last
year (H1 2022: GBP6.8m).
Profit before Tax
Overall Profit before Tax of GBP16.6m was up 20% on last year
(H1 2022: GBP13.8m). Net finance costs reduced to GBP0.2m (H1 2022:
GBP0.4m) benefiting from a full year of reduced lease costs and
also a small amount of interest income.
Profit for the period
Profit after taxation increased by GBP1.7m, or 15%, to GBP13.3m
(H1 2022: GBP11.6m). The Effective Tax Rate ("ETR") for the 2023
half year is 19.9% (H1 2022: 15.9%). For the full year 2023 we
expect the ETR to be around 20% (2022: 15.2%). The increase in the
ETR is principally due to the increase in the UK Corporation Tax
rate from 19% to an average of 23.5% in 2023.
Earnings per share
Basic earnings per share increased by 15% to 4.52 pence (H1
2022: 3.92 pence). Diluted earnings per share increased by 16% to
4.45 pence (H1 2022: 3.85 pence).
Cash flow
Cash generated from operations was very strong at GBP26.2m in
the period (H1 2022: GBP17.8m) up GBP8.4m on last year. Net cash
generated from operating activities was also very strong at
GBP22.6m (H1 2022: GBP13.4m) with tax payments of GBP3.4m down on
the GBP4.0m for H1 2022.
Net cash (including the effect of exchange rate changes)
increased by GBP7.6m to GBP26.3m at 30 June 2023, from GBP18.7m at
31 December 2022. There was GBP22.6m of net cash generated from
operating activities (H1 2022: GBP13.4m). In the period the 2022
Final Dividend and a 2023 Special Dividend were paid, totalling
GBP7.9m (H1 2022: GBP12.2m). In addition, the purchase of own
shares was GBP4.7m (H1 2022: GBP2.0m) for both the share buyback
and to fund the EBT. Net capital expenditure of GBP1.7m was up on
last year (H1 2022: GBP1.0m) with as expected increased
capitalisation of software up to GBP1.0m (H1 2022: GBP0.7m) and
with other capex of GBP0.7m (H1 2022: GBP0.3m) principally due to
some increased investment in IT equipment.
The Group's Operating Free Cash Flow Conversion (FCF) of 140%
(H1 2022: 112%) was particularly strong, benefiting as usual from
maintenance payment receipts in the first half, but also from an
increase in trade and other payables. As noted before, over time
the ongoing trend for 12 month cash conversion will be around 100%
as we move to a subscription license model.
The Board have declared a 4.0 pence per share special dividend,
amounting to GBP11.8m, payable on 6 October 2023 with a record date
of 15 September 2023 and an ex-dividend date of 14 September
2023.
Balance sheet
The significant movements in the Group's balance sheet, aside
from the cash balance which is described above, from 31 December
2022 to 30 June 2023 are detailed below.
Trade receivables reduced by GBP0.5m to GBP8.4m at 30 June 2023
(31 December 2022: GBP8.9m) remaining extremely well controlled.
Accrued income increased from the year end position to GBP7.8m (31
December 2022: GBP6.5m) on the back of higher revenues in June
compared with December.
Trade and other payables balance increased by GBP2.2m to
GBP11.7m at 30 June 2023 (31 December 2022: GBP9.5m) mainly due to
payroll taxes as a result of the LTIP vesting in June 2023.
Contract liabilities increased by GBP5.6m to GBP20.4m at 30 June
2023 (31 December 2022: GBP14.8m) reflecting the timing of billing
of a number of annual maintenance contracts on 1 May.
Subsequent events and related parties
On the 9 June 2023, Alfa announced that it had received a number
of unsolicited, non-binding proposals from EQT regarding a possible
offer for Alfa. On 7 July 2023 EQT made a Rule 2.8 announcement
that they did not intend to make an offer for Alfa. Included in H1
2023 results are GBP0.5m of costs incurred in association with the
possible offer.
Details about related party transactions are disclosed in note
17.
PRINCIPAL RISKS AND UNCERTAINTIES
Principal risks and uncertainties which could have a material
impact on the long-term performance of Alfa Financial Software
Holdings PLC and its subsidiaries were set out in the Alfa
Financial Software Holdings PLC Annual Report for the year ended 31
December 2022, dated 1 March 2023, and remain valid at the date of
this report.
Those risks and uncertainties at the date of this report where
the impact continues to be assessed as "Major" and where the
probability of the event is assessed as at least "Possible"
were:
-- Socio-economic and geo-political risk: the risk of global and
local recessions due to recent events including the Ukraine war and
Brexit. There is also increased risk as a result of high inflation
and interest rates.
-- Risk to people, teams and skills: talent recruitment,
training and retention may not keep pace with our forecasts,
preventing us fulfilling obligations to customers or taking on new
business.
-- IT security and cyber risks: a targeted attack could
adversely affect our customers' or potential customers' perception
of Alfa Systems and could impact our ability to operate our
business.
In addition, since the Annual Report, the following risk has
been newly raised as a principal risk, with a probability of
"Possible", and an impact of "Major":
-- Competition risk: competitors may gain or steal our market
share in target markets, impacting our growth potential.
Also, since the Annual Report, the following risk has been
reassessed to have an increased probability, moving from "Possible"
to "Likely", still with an impact of "Moderate":
-- Legacy versions of Alfa Systems continue to be supported for a number of customers. The infrastructure management and support of these may become expensive, time-consuming and insecure in the period leading up to complete decommissioning.
UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
COMPREHENSIVE INCOME FOR THE SIX MONTHSED 30 JUNE 2023
H1 2023 H1 2022
GBPm Note Unaudited Unaudited
------------------------------------ ----- ----------- -----------
Continuing Operations
Revenue 3 52.9 43.9
Cost of sales (19.2) (15.6)
------------------------------------ ----- ----------- -----------
Gross profit 33.7 28.3
Sales, general and administrative
expenses (17.0) (14.6)
Other operating income 0.2 0.5
------------------------------------ ----- ----------- -----------
Operating profit 4 16.9 14.2
Share of results of associates (0.1) -
and joint ventures
------------------------------------ ----- ----------- -----------
Profit before net finance costs
and tax 16.8 14.2
Finance income 0.1 -
Finance costs (0.3) (0.4)
Profit before tax 16.6 13.8
Tax expense 6 (3.3) (2.2)
------------------------------------ ----- ----------- -----------
Profit for the period attributable
to owners of the parent 13.3 11.6
------------------------------------ ----- ----------- -----------
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation of
foreign operations (0.2) 0.4
------------------------------------ ----- ----------- -----------
Total comprehensive income, net
of tax (0.2) 0.4
------------------------------------ ----- ----------- -----------
Total comprehensive income for
the period attributable to owners
of the parent 13.1 12.0
------------------------------------ ----- ----------- -----------
Earnings per share (in pence)
Basic 4.52 3.92
Diluted 4.45 3.85
The consolidated statement of profit or loss and comprehensive
income should be read in conjunction with the accompanying
notes.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30
JUNE 2023
30 June 31 Dec
2023 2022
GBPm Note Unaudited Audited
---------------------------------- ----- ----------- ---------
Assets
Non-current assets
Goodwill 7 24.7 24.7
Other intangible assets 8 3.4 2.9
Property, plant and equipment 9 1.4 1.0
Right-of-use assets 10 6.6 7.1
Deferred tax assets 1.0 1.6
Interests in joint ventures 0.2 0.2
Total non-current assets 37.3 37.5
---------------------------------- ----- ----------- ---------
Current assets
Trade receivables 11 8.4 8.9
Accrued income 12 7.8 6.5
Prepayments 12 3.7 4.5
Other receivables 12 0.5 0.2
Corporation tax receivable 0.5 0.2
Cash and cash equivalents 26.3 18.7
---------------------------------- ----- ----------- ---------
Total current assets 47.2 39.0
---------------------------------- ----- ----------- ---------
Total assets 84.5 76.5
---------------------------------- ----- ----------- ---------
Liabilities and equity
Current liabilities
Trade and other payables 13 11.7 9.5
Lease liabilities 14 1.4 1.3
Contract liabilities - deferred
maintenance 13 20.4 14.8
Total current liabilities 33.5 25.6
---------------------------------- ----- ----------- ---------
Non-current liabilities
Lease liabilities 14 7.4 8.0
Provisions for other liabilities 13 0.6 0.9
Total non-current liabilities 8.0 8.9
---------------------------------- ----- ----------- ---------
Total liabilities 41.5 34.5
---------------------------------- ----- ----------- ---------
Capital and reserves
Share capital 0.3 0.3
Translation reserve 0.2 0.4
Own shares 15 (8.2) (7.5)
Retained earnings 50.7 48.8
---------------------------------- ----- ----------- ---------
Total equity 43.0 42.0
---------------------------------- ----- ----------- ---------
Total liabilities and equity 84.5 76.5
---------------------------------- ----- ----------- ---------
The consolidated statement of financial position should be read
in conjunction with the accompanying notes.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
SIX MONTHSED 30 JUNE 2023
Equity
attributable
Share Own Translation Retained to owners
GBPm Note capital shares reserve earnings of the parent
---------------------------- ----- --------- -------- ------------ ---------- ---------------
Balance as at 1 January
2022 0.3 (3.4) - 46.5 43.4
---------------------------- ----- --------- -------- ------------ ---------- ---------------
Profit for the financial
period - - - 11.6 11.6
Other comprehensive
income - - 0.4 - 0.4
---------------------------- ----- --------- -------- ------------ ---------- ---------------
Total comprehensive
income for the period - - 0.4 11.6 12.0
Equity settled share-based
payment schemes - - - 0.7 0.7
Dividends - - - (12.2) (12.2)
Own shares distributed - 0.2 - - 0.2
Own shares acquired - (2.2) - - (2.2)
Balance as at 30
June 2022 0.3 (5.4) 0.4 46.6 41.9
---------------------------- ----- --------- -------- ------------ ---------- ---------------
Balance as at 1 January
2023 0.3 (7.5) 0.4 48.8 42.0
Profit for the financial
period - - - 13.3 13.3
Other comprehensive
income - - (0.2) - (0.2)
---------------------------- ----- --------- -------- ------------ ---------- ---------------
Total comprehensive
income for the period - - (0.2) 13.3 13.1
Equity settled share-based
payment schemes - - - 0.7 0.7
Equity settled share
based payment schemes
- deferred tax impact - - - (0.4) (0.4)
Dividends - - - (7.9) (7.9)
Own shares distributed 15 - 4.0 - (3.8) 0.2
Own shares acquired 15 - (4.7) - - (4.7)
---------------------------- ----- --------- -------- ------------ ---------- ---------------
Balance as at 30
June 2023 0.3 (8.2) 0.2 50.7 43.0
---------------------------- ----- --------- -------- ------------ ---------- ---------------
The consolidated statement of changes in equity should be read
in conjunction with the accompanying notes.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX
MONTHSED 30 JUNE 2023
H1 2023 H1 2022
GBPm Note Unaudited Unaudited
----------------------------------------- ----- ----------- -----------
Cash flows from operations
Profit before tax 16.6 13.8
Net finance costs 0.2 0.4
Share of net loss from joint venture 0.1 -
Operating profit 16.9 14.2
Adjustments:
Depreciation 9/10 0.9 1.2
Amortisation 8 0.5 0.4
Share-based payment charge 0.7 0.7
Movement in provisions (0.3) (0.2)
Movement in working capital:
Movement in contract liabilities 5.6 5.9
Movement in trade and other receivables (0.3) (4.3)
Movement in trade and other payables
(excluding contract liabilities) 2.2 (0.1)
----------------------------------------- ----- ----------- -----------
Cash generated from operations 26.2 17.8
Interest element on lease payments (0.2) (0.4)
Income taxes paid (3.4) (4.0)
----------------------------------------- ----- ----------- -----------
Net cash generated from operating
activities 22.6 13.4
----------------------------------------- ----- ----------- -----------
Cash flows from investing activities
Purchases of property, plant and
equipment 9 (0.7) (0.3)
Payments for internally developed
software 8 (1.0) (0.7)
Net cash used in investing activities (1.7) (1.0)
----------------------------------------- ----- ----------- -----------
Cash flows from financing activities
Dividends paid to Company shareholders 18 (7.9) (12.2)
Principal element of lease payments 14 (0.8) (0.9)
Purchase of own shares 15 (4.7) (2.0)
Net cash used in financing activities (13.4) (15.1)
----------------------------------------- ----- ----------- -----------
Net increase / (decrease) in cash
and cash equivalents 7.5 (2.7)
----------------------------------------- ----- ----------- -----------
Cash and cash equivalents at the
beginning of the period 18.7 23.1
----------------------------------------- ----- ----------- -----------
Effect of foreign exchange rate
changes on cash
and cash equivalents 0.1 0.4
----------------------------------------- ----- ----------- -----------
Cash and cash equivalents at the
end of the period 26.3 20.8
----------------------------------------- ----- ----------- -----------
The consolidated cash flow statement should be read in
conjunction with the accompanying notes.
Notes to the Condensed Consolidated Half Year Financial
Statements for the six months ended 30 June 2023
1. General information
Alfa Financial Software Holdings PLC ("Alfa" or the "Company")
is a public company limited by shares and is incorporated and
domiciled in England. Its registered office is at Moor Place, 1
Fore Street Avenue, London, EC2Y 9DT, United Kingdom. Alfa's
registration number is 10713517.
The principal activity of the Company and its subsidiaries (the
"Group") is to provide software solutions and consultancy services
to the asset finance industry in the United Kingdom, United States
of America, Europe and Asia Pacific.
These unaudited Half Year Financial Statements have been
approved for issue by the Board of Directors on 30 August 2023.
These Half Year Financial Statements have been reviewed but not
audited.
2. Accounting policies
2(a) Basis of preparation
The Half Year Financial Statements have been prepared in
accordance with IAS 34 "Half Year Financial Reporting" as contained
in UK-adopted International Accounting Standards and the Disclosure
and Transparency Rules of the Financial Conduct Authority.
These Half Year Financial Statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. Accordingly this report should be read in conjunction with
the annual report for the year ended 31 December 2022 (the "Annual
Financial Statements") which was prepared in accordance with
UK-adopted International Accounting Standards and any public
announcements made by Alfa during the Half Year reporting period.
The Annual Financial Statements constitute statutory accounts as
defined in section 434 of the Companies Act 2006 and a copy these
statutory accounts has been delivered to the Registrar of
Companies. The auditor's report on the Annual Financial Statements
was not qualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under section
498(2) or (3) of the Companies Act 2006.
The accounting policies adopted in the preparation of the Half
Year Financial Statements are consistent with those used to prepare
Alfa's consolidated financial statements for the year ended 31
December 2022 and the corresponding Half Year reporting period.
The preparation of the Half Year Financial Statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing these Half
Year Financial Statements, the significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that
applied to the consolidated Annual Financial Statements described
above. The Half Year Financial Statements have been prepared on a
going concern basis, under the historical cost convention.
2(b) Going concern
The half-yearly financial statements are prepared on the going
concern basis. The Group continues to be cash-generative and the
Directors believe that the Group has a resilient business model.
The Group meets its day-to-day working capital requirements through
its cash reserves generated from operating activities. The Group's
forecasts and projections, taking account of planned dividend
payments and reasonably possible changes in trading performance,
show that the Group has sufficient cash reserves to operate for a
period of not less than 12 months.
The going concern assessment performed also includes downside
stress testing in line with FRC guidance which demonstrates that
even in the most extreme downside conditions considered reasonably
possible, given the existing level of cash held, the Group would
continue to be able to meet its obligations as they fall due,
without the need for substantive mitigating actions and taking
account of planned dividend payments.
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 half-yearly financial statements.
2(c) Changes in accounting policies
The Group has not adopted any new accounting standards in the
period. Other changes to accounting standards in the period had no
material impact.
2(d) Seasonality
The Group is not normally significantly influenced by
seasonality or cyclical fluctuation because the Group's revenues
are relatively consistent throughout the year. The Group's revenue
is influenced by the number and maturity of software
implementations during the period. Separately, the Group's cash
flows are subject to seasonal fluctuations because the Group
invoices a significant proportion of its customers for maintenance
annually in advance in the first six months of each year, resulting
in a higher inflow of cash receipts in the first half of the
Group's financial year in respect of maintenance revenues.
2(e) Foreign currency
The following exchange rates were used in the financial
statements:
USD EUR AUD NZD
--- ---------------------------- ----- ----- ----- -----
Average rate 6 months to:
30 June 2023 1.23 1.14 1.82 1.98
30 June 2022 1.29 1.19 1.81 1.96
Closing rate:
30 June 2023 1.27 1.16 1.91 2.07
31 Dec 2022 1.21 1.13 1.77 1.90
3. Segment information and revenue from contracts with customers
3(a) Revenue by stream
The Group assesses revenue by type of activity, being
Subscription, Software and Services, as summarised below:
H1 2023 H1 2022
GBPm Unaudited Unaudited
--------------- ----------- -----------
Subscription 15.4 13.5
Software 8.9 6.7
Services 28.6 23.7
--------------- ----------- -----------
Total revenue 52.9 43.9
--------------- ----------- -----------
3(b) Revenue by geography
Revenue attributable to each geographical market based on where
the customer mainly utilises its instance of Alfa, or where the
service is rendered, is as follows:
H1 2023 H1 2022
GBPm Unaudited Unaudited
UK 19.5 14.2
US 17.2 16.1
Rest of EMEA (excl. UK) 12.1 9.6
Rest of the World 4.1 4.0
------------------------- ----------- -----------
Total revenue 52.9 43.9
------------------------- ----------- -----------
3(c) Revenue by currency
Revenue by contractual currency is as follows:
H1 2023 H1 2022
GBPm Unaudited Unaudited
--------------- ----------- -----------
GBP 24.1 16.7
USD 17.7 16.5
EUR 7.0 6.7
Other 4.1 4.0
--------------- ----------- -----------
Total revenue 52.9 43.9
--------------- ----------- -----------
3(d) Liabilities from contracts with customers
H1 2023 H1 2022
GBPm Unaudited Unaudited
--------------------------------------------- ----------- -----------
Contract liabilities - deferred licence 9.3 5.8
Contract liabilities - deferred maintenance 11.1 11.1
--------------------------------------------- ----------- -----------
Total contract liabilities 20.4 16.9
--------------------------------------------- ----------- -----------
3(e) Timing of revenue
Timing of revenue - the Group derives revenue from the transfer
of goods and services as follows over time and at a point in time
in the following revenue segments:
H1 2023 - GBPm Subscription Software Services Total revenue
----------------------------------------- ------------- --------- --------- --------------
At a point in time - time and materials - 5.5 20.1 25.6
At a point in time - fixed price - 0.3 - 0.3
Over time - time and materials - 2.0 8.5 10.5
Over time - fixed price 15.4 1.1 - 16.5
Total revenue 15.4 8.9 28.6 52.9
----------------------------------------- ------------- --------- --------- --------------
H1 2022 - GBPm Subscription Software Services Total revenue
----------------------------------------- ------------- --------- --------- --------------
At a point in time - time and materials - 2.3 15.9 18.2
At a point in time - fixed price - 0.2 0.4 0.6
Over time - time and materials - 3.9 7.4 11.3
Over time - fixed price 13.5 0.3 - 13.8
Total revenue 13.5 6.7 23.7 43.9
----------------------------------------- ------------- --------- --------- --------------
4. Operating profit
The following items have been included in arriving at operating
profit in the table below:
GBPm
H1 2023 H1 2022
GBPm Unaudited Unaudited
----------------------------------------------- ----------- -----------
Research and development costs 1.5 1.1
Depreciation of property, plant and equipment 0.3 0.3
Depreciation of right-of-use lease assets 0.6 0.9
Amortisation of intangible assets 0.5 0.4
Foreign exchange gain (0.1) (0.6)
Share-based payments 0.9 0.8
Costs related to possible offer* 0.5 -
Gain on forward contract (0.1) -
----------------------------------------------- ----------- -----------
* Costs related to possible offer of GBP0.5m were incurred in
the first half of 2023 (2022 H1: nil) and comprised legal fees and
expenses incurred as a result of a possible offer for Alfa from a
private equity firm called EQT. Refer to Note 19 for more
details.
5. Employee costs
H1 2023 H1 2022
GBPm Unaudited Unaudited
----------------------------------------- ----------- -----------
Wages and salaries 19.6 16.3
Social security contributions (on wages
and salaries) 2.3 2.2
Pension costs 1.5 1.2
Profit share pay* 2.1 1.6
Share-based payments** 0.9 0.8
----------------------------------------- ----------- -----------
Total employment costs 26.4 22.1
----------------------------------------- ----------- -----------
* Profit share pay refers to a pool of money (that equates to
approximately 10% of the Group's pre-tax profits before charging
profit share) which is shared amongst the employees, excluding
Directors and some other senior managers, as a percentage of basic
salary. The amount disclosed includes the related social security
contributions.
** This includes the related social security contributions.
Average monthly number of people employed H1 2023 H1 2022
(including Directors) Unaudited Unaudited
--------------------------------------------- ----------- -----------
UK 330 301
US 82 70
Rest of the World 41 28
--------------------------------------------- ----------- -----------
Total average monthly number of people
employed 453 399
--------------------------------------------- ----------- -----------
At 30 June 2023 the Group had 462 employees (30 June 2022:
417).
6. Income tax expense
Income tax expense is calculated on management's best estimate
of the full financial year expected rate, which is then adjusted
for discrete items occurring in the reporting period.
The income tax expense for the six-month period ended 30 June
2023 was GBP3.3m (H1 2022: GBP2.2m). The Effective Tax Rate ("ETR")
for the 2023 half year is 19.9% (H1 2022: 15.9%).
The ETR for 2023 is impacted by the increase in the UK rate of
corporation tax (2023: 23.5%, 2022: 19%), and benefits in respect
of prior year items - H1 2023 a credit of GBP0.9m, H1 2022 a credit
of GBP0.1m.
For the full year 2023 we expect the ETR to be around 20% (2022
actual: 15.2%).
7. Goodwill
H1 2023 FY 2022
Unaudited Audited
-------------- ----------- ---------
Cost
At 1 January 24.7 24.7
-------------- ----------- ---------
At 30 June 24.7 24.7
-------------- ----------- ---------
Goodwill arose on the acquisition of subsidiaries in 2012 as
part of a group reorganisation and represents the excess of the
consideration transferred and the amount of any non-controlling
interest in the investment over the fair value of the identifiable
assets acquired and the liabilities and contingent liabilities
assumed.
We have assessed whether there are any indicators of possible
impairment of goodwill. Considering in particular the fact that we
have experienced strong trading performance during the six month
period along with the carrying value of the assets for the Company
remaining significantly below the market capitalisation of the
Company, we found no indicators of possible impairment of goodwill.
As a consequence no formal goodwill impairment test has been
carried out.
8. Other intangible assets
Computer software Internally generated
GBPm software Total
----------------------- ------------------ --------------------- ------
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
At 31 December 2022 1.0 2.1 3.1
----------------------- ------------------ --------------------- ------
Net book value
----------------------- ------------------ --------------------- ------
At 31 December 2022 0.7 2.2 2.9
----------------------- ------------------ --------------------- ------
Cost
At 1 January 2023 1.7 4.3 6.0
Additions - 1.0 1.0
At 30 June 2023 1.7 5.3 7.0
----------------------- ------------------ --------------------- ------
Amortisation
At 1 January 2023 1.0 2.1 3.1
Charge for the period 0.1 0.4 0.5
At 30 June 2023 1.1 2.5 3.6
----------------------- ------------------ --------------------- ------
Net book value
----------------------- ------------------ --------------------- ------
At 30 June 2023 0.6 2.8 3.4
----------------------- ------------------ --------------------- ------
Significant movement in other intangible assets
During H1 2023, Alfa developed new internally generated software
at a cost of GBP1.0m (H1 2022: GBP0.7m). This software will be
amortised over three to five years.
The total research and product development expense for H1 2023
was GBP1.5m (H1 2022: GBP1.1m) (see Note 4).
9. Property, plant and equipment
Fixtures
GBPm and fittings IT equipment Total
------------------------ -------------- ------------- ------
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 period 0.2 0.3 0.5
Eliminated on disposal (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
------------------------ -------------- ------------- ------
Cost
At 1 January 2023 1.5 3.8 5.3
Additions 0.1 0.6 0.7
At 30 June 2023 1.6 4.4 6.0
Depreciation
At 1 January 2023 0.9 3.4 4.3
Charge for the period 0.1 0.2 0.3
At 30 June 2023 1.0 3.6 4.6
------------------------ -------------- ------------- ------
Net book value
------------------------ -------------- ------------- ------
At 30 June 2023 0.6 0.8 1.4
------------------------ -------------- ------------- ------
10. Right-of-use assets
GBPm Motor vehicles Property Total
----------------------- --------------- --------- ------
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 period 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
----------------------- --------------- --------- ------
Cost
At 1 January 2023 0.5 10.9 11.4
Additions 0.1 - 0.1
Disposals (0.1) - (0.1)
----------------------- --------------- --------- ------
At 30 June 2023 0.5 10.9 11.4
----------------------- --------------- --------- ------
Depreciation
At 1 January 2023 0.3 4.0 4.3
Charge for the period 0.2 0.4 0.6
Disposal (0.1) - (0.1)
At 30 June 2023 0.4 4.4 4.8
----------------------- --------------- --------- ------
Net book value
At 30 June 2023 0.1 6.5 6.6
----------------------- --------------- --------- ------
11 Trade receivables
The Group holds the following trade receivables:
H1 2023 FY 2022
GBPm Unaudited Audited
-------------------------- ----------- ---------
Trade receivables 8.4 8.9
Provision for impairment - -
Total trade receivables
- net 8.4 8.9
--------------------------- ----------- ---------
Trade receivables ageing
H1 2023 FY 2022
Ageing of net trade receivables GBPm Unaudited Audited
-------------------------------------- ----------- ---------
Within agreed terms 6.5 6.4
Past due 1-30 days 1.9 2.4
Past due 31-90 days - 0.1
Past due 91+ days - -
-------------------------------------- ----------- ---------
Trade receivables - net 8.4 8.9
-------------------------------------- ----------- ---------
The Group believes that the unimpaired amounts that are past due
are fully recoverable as there are no indicators of future
delinquency or potential litigation.
12 Other receivables
H1 2023 FY 2022
GBPm Unaudited Audited
----------------------------- ----------- ---------
Accrued income 7.8 6.5
Prepayments 3.7 4.5
Corporation tax recoverable 0.5 0.2
Other receivables 0.5 0.2
Total other receivables 12.5 11.4
----------------------------- ----------- ---------
Accrued income represents fees earned, but not invoiced, at the
reporting date, which have no right of offset with contract
liabilities - deferred licence amounts. Accrued income increased by
GBP1.3m since last year-end driven by increased revenues and
invoice timing.
Prepayments include GBP1.5m of deferred costs in relation to
costs to fulfil contracts.
13 Current liabilities
H1 2023 FY 2022
GBPm Unaudited Audited
------------------------------------------------ ----------- ---------
Trade payables 0.4 0.8
Other payables 11.3 8.7
Contract liabilities - software implementation 9.3 8.6
Contract liabilities - deferred maintenance 11.1 6.2
Lease liabilities 8.8 9.3
Provisions for other liabilities 0.6 0.9
Total trade and other payables 41.5 34.5
Less: non-current portion (8.0) (8.9)
------------------------------------------------ ----------- ---------
Total current liabilities 33.5 25.6
------------------------------------------------ ----------- ---------
14 Lease liabilities
The following table sets out the reconciliation of the lease
liabilities from the 1 January 2022 to the amount disclosed at 30
June 2023:
GBPm Total
----------------------------------------------------- ------- ----------- -------------
Lease liabilities recognised at
1 January 2022 17.1
Additions 0.1
Disposals (6.3)
Interest charge 0.6
Payments made on lease liabilities (2.2)
At 31 December 2022 9.3
----------------------------------------------------- ------- ----------- -------------
Additions 0.1
Disposals -
Interest charge 0.2
Payments made on lease liabilities (0.8)
At 30 June 2023 8.8
----------------------------------------------------- ------- ----------- -------------
Additions to lease liabilities include extensions to existing
lease agreements.
Below is the summary of timing of the lease payments:
H1 2023 FY 2022
GBPm Unaudited Audited
---------------------------------------------------- ---- --------------- -------------
Non-current liability 7.4 8.0
Current liability 1.4 1.3
---------------------------------------------------------- --------------- -------------
8.8 9.3
---- --------------- -------------
Below is the maturity analysis of the lease liabilities:
H1 2023 FY 2022
Maturity analysis: Unaudited Audited
---------------------------------------------------- ---- --------------- -------------
No later than 1 year 1.8 1.8
Between one year and 5 years 6.1 6.2
Later than 5 years 2.0 2.9
---------------------------------------------------------- --------------- -------------
Total future lease payments 9.9 10.9
Total future interest payments (1.1) (1.6)
---------------------------------------------------------- --------------- -------------
8.8 9.3
--------------------------------------------------------- --------------- -------------
The group's net debt is made up of cash and cash equivalents and
lease liabilities. The movement during the period in lease
liabilities is set out above. These are the only changes in
liabilities arising from financing activities in the period.
Movements in cash and cash equivalents are set out in the Cash flow
statement.
15 Own shares
H1 2023 FY 2022
GBPm Unaudited Audited
-------------------------- ----------- ---------
Own shares at 1 January 7.5 3.4
Own shares acquired 4.7 5.6
Own shares distributed (4.0) (1.5)
At 30 June / 31 December 8.2 7.5
--------------------------- ----------- ---------
The own shares reserve represents the cost of shares in Alfa
Financial Software Holdings PLC that have been:
-- Purchased and held by the Group's employee benefit trust to satisfy options under the Group's share options
plans. The number of shares held at H1 2023 was 740,221 (FY 2022: 2,163,952); and
-- Purchased and held by the Group as a result of the share buyback programme that was launched on 18 January 2022.
The number of shares held at H1 2023 was 4,775,119 (FY 2022: 2,832,073).
Own shares distributed relate to shares issued to employees for
bonus awards deferred in shares.
16 Financial and liquidity risk management
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk and price risk), credit
risk and liquidity risk. The Half Year Financial Statements do not
include all financial risk management information and disclosures
required in the Annual Financial Statements; they should be read in
conjunction with the Annual Financial Statements. The
responsibility for risk management has remained with the Board and
there have been no changes to risk management policies since
year-end.
17 Controlling party and related party transactions
The immediate and ultimate parent undertaking is CHP Software
and Consulting Limited, which is the parent undertaking of the
smallest and largest group in relation to these Half Year
consolidated financial statements. The ultimate controlling party
is Andrew Page. There was no trading between the Group and the
Parent in H1 of 2023.
In H1 2022 the company had rental income of GBP443,186 from a
short-term rental agreement with CHP Software and Consulting
Limited for rental of the 9th Floor of Moor Place. There was no
such income in H1 2023 due to the assignment of the lease to the
9th floor of Moor Place, 1 Fore Street Avenue, London to the
Ultimate Parent in July 2022.
In H1 2023 the company sold two debentures to CHP Software and
Consulting Limited for GBP192,000 (H1 2022: nil). The transaction
was at arm's length.
Dividends to the amount of GBP4,749,453 were paid to the Parent
in H1 2023 (H1 2022: GBP8,103,472).
At 30 June 2023 there was GBPnil balances outstanding from, or
to, the parent (30 June 2022: GBPnil).
18 Dividends
The Board declared a 1.5 pence per share Special dividend,
amounting to GBP4.4m, payable on 9 May 2023 with a record date of
14 April 2023. An ordinary dividend of 1.2 pence per share for the
year ended 31 December 2022 equating to GBP3.5m was paid on 26 June
2023.
The Board declared on 30 August 2023 a special dividend of 4.0
pence per share, with an ex-dividend date of 14 September 2023, a
record date of 15 September 2023 and a payment date of 6 October
2023. The dividend in total would amount to a total payment of
GBP11.8m.
19 Subsequent events
On 9 June 2023, Alfa announced that it had received a number of
unsolicited, non-binding proposals from EQT regarding a possible
offer for Alfa. On 7 July EQT made a Rule 2.8 announcement that
they do not intend to make an offer for Alfa.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed consolidated Half
Year financial statements (the 'Half Year Financial Statements')
have been prepared in accordance with International Accounting
Standard 34, 'Half Year Financial Reporting', as contained in
UK-adopted international accounting standards and that the Half
Year management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during the first six months and their impact on the
condensed Half Year Financial Statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- material related-party transactions in the first six months and any material changes in the related-party
transactions described in the last annual report.
The current directors are listed below all of whom were
directors during the whole of the period:
Andrew Page
Andrew Denton
Duncan Magrath
Matthew White
Steve Breach
Adrian Chamberlain
Charlotte de Metz
Chris Sullivan
By order of the Board
Duncan Magrath
Chief Financial Officer
30 August 2023
INDEPENT REVIEW REPORT TO ALFA FINANCIAL SOFTWARE HOLDINGS
PLC
Conclusion
We have been engaged by Alfa Financial Software Holdings PLC
('the Company') to review the condensed set of financial statements
of the Company and its subsidiaries (the 'Group') in the
half-yearly financial report for the six months ended 30 June 2023
which comprises the consolidated statement of profit or loss and
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity, the
consolidated statement of cash flows and related notes 1 to 19. We
have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
material misstatements of fact or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, "Interim Financial
Reporting" as contained in UK-adopted International Accounting
Standards, and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ('ISRE (UK) 2410') issued for use in the United Kingdom. A
review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK-adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting" as contained in UK-adopted International
Accounting Standards.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that management have inappropriately adopted
the going concern basis of accounting or that management have
identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group and the Company to cease to continue as a going
concern.
Responsibilities of Directors
The half-yearly financial report, is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
International Accounting Standard 34, "Interim Financial Reporting"
as contained in UK-adopted International Accounting Standards and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Review of the Financial
Information
In reviewing the half-yearly financial report, we are
responsible for expressing to the Company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information performed by the Independent Auditor
of the Entity". Our review work has been undertaken so that we
might state to the Company those matters we are required to state
to them in an independent review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
30 August 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 or operating profit to eliminate the
effect of changes in currency values. When trend information is
expressed herein "in constant currencies", the comparative results
are derived by re-calculating comparative non-GBP denominated
revenues and/or expenses using the average exchange rates of the
comparable months in the current reporting period.
Operating free cash flow (FCF) conversion
Operating FCF conversion is calculated as cash from operations,
less capital expenditures and the principal element of lease
payments, as a percentage of operating profit. Operating FCF is
calculated as follows:
H1 2023 H1 2022
Unaudited GBPm GBPm
------------------------------------- -------- --------
Cash generated from operations 26.2 17.8
Capital expenditure (1.7) (1.0)
Principal element of lease payments (0.8) (0.9)
------------------------------------- -------- --------
Operating FCF generated 23.7 15.9
Operating FCF Conversion 140% 112%
Total contract value (TCV)
Total contract 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 H1 2023 H2 2022 H1 2022
----------------------------- -------- -------- --------
USD 1.30 1.25 1.30
EUR 1.18 1.18 1.16
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR PMMRTMTAJBIJ
(END) Dow Jones Newswires
August 31, 2023 02:00 ET (06:00 GMT)
Alfa Financial Software (LSE:ALFA)
Historical Stock Chart
From Jun 2024 to Jul 2024
Alfa Financial Software (LSE:ALFA)
Historical Stock Chart
From Jul 2023 to Jul 2024
