REG - Alfa Financial Soft - 2023 Half Year Report
31/08/2023 07:00
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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
£m, 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%
£m H1 2023 Unaudited 31 Dec 2022 Movement %
Audited
Cash 26.3 18.7 41%
Key measures ((1)) H1 2023 H1 2022 Movement
£m, 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 £26.3m of cash and no bank debt
* Special dividend of 4.0 pence per share (£11.8m) 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 £1m 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 £138m 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 (mailto:alfa@teneo.com)
. Please dial in at least 10 minutes prior to the start time.
An archived webcast of the call will be available on the Investors page of the
Company's website https://www.alfasystems.com/en-eu/investors
(https://www.alfasystems.com/en-eu/investors)
Notes to editors
Alfa has been delivering 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 (http://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 £52.9m (H1 2022: £43.9m) with growth across all
revenue streams. Operating profit performance was also strong, up 19% to
£16.9m (H1 2022: £14.2m). Cash conversion was also very good at 140% (2022:
112%) and we finished the period with net cash of £26.3m (31 Dec 2022:
£18.7m).
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 £138m 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 c£30m
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 £1m 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 £3.5m 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 £4.4m. This took
total special dividend payments over the last three years to 33p or £98m.
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 £3.1m. This took total purchases since
the program started to 4.8m shares at cost of £7.7m. 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 £11.0m, we finished the period
with a strong balance sheet with net cash of £26.3m 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 £11.8m.
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
£m 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 £9.0m to £52.9m in the six months ended 30 June
2023 (H1 2022: £43.9m). Growth at constant currency was 18%.
Gross profit increased 19% to £33.7m (H1 2022: £28.3m) slightly behind the
increase in revenue mainly due to increased headcount and salary inflation,
with operating profit increasing by 19% or £2.7m to £16.9m (H1 2022:
£14.2m) with profit before tax of £16.6m (H1 2022: £13.8m).
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 £13.3m (H1 2022: £11.6m).
Revenue
Revenue - by type H1 2023 H1 2022 Movement
£m 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 £15.4m (2022 H1:
£13.5m) 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 £8.9m were up £2.2m or 33% on last year (H1 2022:
£6.7m), 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 £0.3m (H1 2022: £0.2m) 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 £28.6m (H1 2022: £23.7m) 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
£m 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 £138m (31 December 2022:
£143m, 30 June 2022: £138m). Strong growth in subscription TCV was offset
by reductions in Software and Services TCV along with a negative impact from
currency which accounted for £2m of the £5m 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 £30m higher.
Of the TCV at 30 June 2023, £60m (H1 2022: £60m) 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 £6m (H1 2022:
£8m) of Software revenues, £33m (H1 2022: £29m) of Subscription revenues
and £21m (H2 2022: £23m) of Services revenues.
Operating profit
The Group's operating profit increased by £2.7m, or 19%, to £16.9m in H1
2023 (H1 2022: £14.2m) 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
£m 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 £3.6m to £19.2m (H1 2022: £15.6m) 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 £17.0m in the six
month period to 30 June 2023 (H1 2022: £14.6m). This included £0.5m 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 £6.4m (2022
H1: £6.0m). Profit Share Pay, including employer's costs, in the period was
£2.1m (2022 H1: £1.6m) because of higher profits. Share-based payment
charges have increased over last year at £0.9m (H1 2022: £0.8m), principally
due to increased provision for NI costs on the back of the increased share
price. Foreign currency gains of £0.1m, were down from the gain of £0.6m
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 £7.4m increased £0.6m on last year (H1 2022: £6.8m).
Profit before Tax
Overall Profit before Tax of £16.6m was up 20% on last year (H1 2022:
£13.8m). Net finance costs reduced to £0.2m (H1 2022: £0.4m) 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 £1.7m, or 15%, to £13.3m (H1 2022:
£11.6m). 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 £26.2m in the period (H1
2022: £17.8m) up £8.4m on last year. Net cash generated from operating
activities was also very strong at £22.6m (H1 2022: £13.4m) with tax
payments of £3.4m down on the £4.0m for H1 2022.
Net cash (including the effect of exchange rate changes) increased by £7.6m
to £26.3m at 30 June 2023, from £18.7m at 31 December 2022. There was
£22.6m of net cash generated from operating activities (H1 2022: £13.4m). In
the period the 2022 Final Dividend and a 2023 Special Dividend were paid,
totalling £7.9m (H1 2022: £12.2m). In addition, the purchase of own shares
was £4.7m (H1 2022: £2.0m) for both the share buyback and to fund the EBT.
Net capital expenditure of £1.7m was up on last year (H1 2022: £1.0m) with
as expected increased capitalisation of software up to £1.0m (H1 2022:
£0.7m) and with other capex of £0.7m (H1 2022: £0.3m) 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
£11.8m, 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 £0.5m to £8.4m at 30 June 2023 (31 December
2022: £8.9m) remaining extremely well controlled. Accrued income increased
from the year end position to £7.8m (31 December 2022: £6.5m) on the back of
higher revenues in June compared with December.
Trade and other payables balance increased by £2.2m to £11.7m at 30 June
2023 (31 December 2022: £9.5m) mainly due to payroll taxes as a result of the
LTIP vesting in June 2023.
Contract liabilities increased by £5.6m to £20.4m at 30 June 2023 (31
December 2022: £14.8m) 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 £0.5m 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 MONTHS ENDED 30 JUNE 2023
£m Note H1 2023 H1 2022
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 and joint ventures (0.1) -
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
£m Note 30 June 31 Dec 2022
2023
Audited
Unaudited
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 MONTHS ENDED
30 JUNE 2023
£m Note Share Own shares Translation reserve Retained Equity
capital
earnings
attributable to owners 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 MONTHS ENDED 30
JUNE 2023
£m Note H1 2023 H1 2022
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 2.2 (0.1)
(excluding contract liabilities)
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 0.1 0.4
and cash equivalents
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:
£m H1 2023 H1 2022
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:
£m H1 2023 H1 2022
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
£m 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
£m 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 - £m Subscription Software Services Total revenue
At a point in time - time and materials - 5.5 20.1 25.6
At a point in time - fixed price - 0.3 - 0.3
Over time - time and materials - 2.0 8.5 10.5
Over time - fixed price 15.4 1.1 - 16.5
Total revenue 15.4 8.9 28.6 52.9
H1 2022 - £m 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:
£m
H1 2023 H1 2022
£m 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 £0.5m 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
£m 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.
H1 2023 H1 2022
Average monthly number of people employed (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 £3.3m
(H1 2022: £2.2m). 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 £0.9m, H1 2022 a credit of £0.1m.
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
£m Computer software Internally generated 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
£1.0m (H1 2022: £0.7m). This software will be amortised over three to five
years.
The total research and product development expense for H1 2023 was £1.5m (H1
2022: £1.1m) (see Note 4).
9. Property, plant and equipment
£m Fixtures 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
£m 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
£m Unaudited Audited
Trade receivables 8.4 8.9
Provision for impairment - -
Total trade receivables - net 8.4 8.9
Trade receivables ageing
Ageing of net trade receivables £m H1 2023 FY 2022
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
£m 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 £1.3m since last year-end driven
by increased revenues and invoice timing.
Prepayments include £1.5m of deferred costs in relation to costs to fulfil
contracts.
13 Current liabilities
£m H1 2023 FY 2022
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:
£m 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
£m 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
£m H1 2023 FY 2022
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 £443,186 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 £192,000 (H1 2022: nil). The transaction was at arm's length.
Dividends to the amount of £4,749,453 were paid to the Parent in H1 2023 (H1
2022: £8,103,472).
At 30 June 2023 there was £nil balances outstanding from, or to, the parent
(30 June 2022: £nil).
18 Dividends
The Board declared a 1.5 pence per share Special dividend, amounting to
£4.4m, 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 £3.5m 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 £11.8m.
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
INDEPENDENT REVIEW REPORT TO ALFA FINANCIAL SOFTWARE HOLDINGS PLC
Conclusion
We have been engaged by Alfa Financial Software Holdings PLC ('the Company')
to review the condensed set of financial statements of the Company and its
subsidiaries (the 'Group') in the half-yearly financial report for the six
months ended 30 June 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 £m £m
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
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