REG - Alfa Financial Soft - Full Year Report for year ended 31 December 2023
14/03/2024 07:00
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RNS Number : 7693G Alfa Financial Software Hldgs PLC 14 March 2024
14 March 2024
Alfa Financial Software Holdings PLC
Full Year Report for the year ended 31 December 2023
Strong subscription growth driving revenue and TCV
Alfa Financial Software Holdings PLC ("Alfa" or the "Company"), a leading
developer of software for the asset finance industry, today publishes its
audited results for the twelve months ended 31 December 2023 ("the period").
Financial summary
Results Years ended 31 December Movement
£m, unless otherwise stated 2023 2022 %
Revenue 102.0 93.3 9%
Operating profit 30.1 29.6 2%
Profit before tax 29.6 28.9 2%
Earnings per share - basic (p) 7.99 8.24 (3)%
Earnings per share - diluted (p) 7.90 8.09 (2)%
Special dividend declared per share (pence) 2.0 1.5 33%
Proposed ordinary dividend (p) 1.3 1.2 8%
£m 2023 2022 Movement %
Cash 21.8 18.7 17%
Special dividends paid in the year (p) 5.5 6.5 (15)%
Key measures ((1)) 2023 2022 Movement
£m, unless otherwise stated %
Revenue - constant currency 102.0 93.3 9%
Cash generated from operations 39.2 34.0 15%
Operating free cash flow conversion (%) 115% 102% 13%
Total Contract Value (TCV) 165.3 142.9 16%
((1) See definitions section for further information regarding calculation of
measures not defined by IFRS.)
Financial highlights:
· Revenue up 9% versus 2022, driven by subscription revenues up 16%
· Operating profit up 2% on 2022 as we invested in the platform to
deliver the pipeline
· Record TCV of £165.3m up 16% (2022: £142.9m)
· Very strong cash generation with 115% free cash flow conversion
· Robust balance sheet position with £21.8m of cash and no bank
debt
· Special dividend of 2.0 pence per share (£5.9m) declared
· Proposed final ordinary dividend up 8% to 1.3 pence per share
(£3.8m)
Strategic highlights:
Accelerating transition to subscription model
· 16% growth in subscription revenues
· 28% growth in subscription TCV
· 90% of late-stage pipeline looking to utilise Alfa Cloud
Investment in product, people, planet
· £35m (2022: £29m) investment in product
· Launch of Alfa Systems 6, including 10 new modules
· Average headcount increased by 10%
· High staff retention (97%) and engagement (82%)
· Emission reduction targets validated by SBTi and commitment to
net-zero by 2050
Diversification of customer base
· Top five customers generated 35% of revenues (2019: 61%)
· 19 customers contributing revenue over £2m in the period (17 in
2022 and 7 in 2019)
· No customer accounts for more than 10% of revenues (largest
customer 20% of revenues in 2019)
Strong sales and delivery momentum
· Strong late-stage pipeline, increased from 9 to 11, with 6 new
prospects, 3 wins and 1 back to mid-stage
· 10 out of 11 customers in late-stage pipeline at preferred
supplier status
· Record year for software delivery with seven customer go-lives in
the year along with 28 other deliveries
Outlook
The asset and automotive finance markets have continued to remain strong
through 2023 despite broader macro uncertainty with demand for software
remaining robust. Alfa continues to see software projects proceed, new sales
close and new opportunities enter our pipeline.
We expect 2024 revenue growth to be mid to high single digits driven by
continuing strong growth in subscription. Within this performance, we
anticipate a greater weighting in the second half of the year as new sales
come fully on stream. Our encouraging new business pipeline, confidence in
the outlook and our strategy means that Alfa will continue to invest in our
technology and people, whilst continuing to return cash to shareholders
through our sustainable, progressive dividend.
Andrew Denton, Chief Executive Officer
"Throughout 2023 we have remained focused on operational excellence and
delivering our strategy with continuing strong growth in our subscription
business and a record seven go-lives for our customers. We have continued to
develop our product roadmap and have announced the launch of Alfa Systems 6,
the sixth major version of our software. We have a strong late-stage pipeline
and have converted two of these into wins in the last few months. 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 and the conversion of the
late-stage pipeline points to a strong second half in 2024 for our services.
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
Barclays +44 (0)20 7623 2323
Robert Mayhew
Anusuya Gupta
Investec +44 (0)20 7597 4000
Patrick Robb
Virginia Bull
Teneo +44 (0)20 7353 4200
James Macey White
Victoria Boxall
Investor and analyst webcast
The Company will host a conference call today at 09:30am. 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 37 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 Full Year Report ("FYR") has been prepared solely to provide additional
information to shareholders to assess the Group's strategies and the potential
for those strategies to succeed. The FYR should not be relied on by any
other party or for any other purpose. This report contains certain
forward-looking statements. All statements other than statements of
historical fact are forward-looking statements. These include statements
regarding Alfa's intentions, beliefs or current expectations, and those of our
officers, directors and employees, concerning (without limitation), with
respect to the financial condition, results of operations, liquidity,
prospects, growth, strategies and businesses of Alfa. These statements and
forecasts involve known and unknown risks, uncertainty and assumptions because
they relate to events and depend upon circumstances that will or may occur in
the future and should therefore be treated with caution. There are a number
of factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. These forward-looking statements are made only as at the date of
this announcement. Nothing in this announcement should be construed as a
profit forecast. Except as required by applicable law, Alfa disclaims any
obligation or undertaking to update the forward-looking statements or to
correct any inaccuracies therein, or to keep current any other information
contained in the FYR. Accordingly, reliance should not be placed on any
forward-looking statements.
BUSINESS REVIEW
Strong performance
In 2023, we remained focused on continuing to drive the business forward,
delivering growth and at the same time making strong strategic progress
towards a subscription-based business. One of our differentiators is the
quality of our delivery record, and in the year we saw a record of seven
go-live events and a total of 35 delivery events. We have also continued to
develop and enhance our software and the launch of Alfa Systems 6 in Q4 2023,
the sixth major version of our software, has been enthusiastically received by
customers and sees ten new modules available for customers to implement.
Financial performance was strong with revenue up 9% to £102.0m (2022:
£93.3m) with particularly strong growth in subscription revenues, up 16%.
Operating profit was £30.1m (2022: £29.6m) after the costs of investing into
people as we build for future growth. Cash conversion was extremely strong at
115% (2023: 102%) with a high level of receipts just before yearend and we
finished the period with net cash of £21.8m (31 Dec 2022: £18.7m). We expect
this very strong position to partially unwind in 2024, with the long-term
average trend being c100%.
We have had a very strong pipeline for some time now, and it was very pleasing
that we converted two prospects into wins before the end of the year with
Total Contract Value ("TCV") growing 16% to £165m (2022: £143m) at 31
December 2023. This increase in TCV has been driven by 28% growth in our
subscription revenues showing how the transition to a subscription model is
underpinning future revenues. The two recent wins are for major customers with
multi-phase rollouts and these along with prospects we expect to convert in
the late-stage pipeline will provide revenues for the business for years to
come.
We had 19 customers (2022: 17) contributing revenues of more than £2m in the
year, up from just seven in 2019. We have significantly reduced our customer
concentration, with our top five customers now representing 35% of our
revenues in 2023, compared with 61% in 2019. Our largest customer now
represents less than 10% of our revenues for the first time in over 8 years.
As expected, following very strong recruitment for the previous two years and
as a result of our improved and very high retention rate of 97% (2022: 90%),
we deliberately slowed recruitment in 2023. This was to ensure the quality of
the experience for new joiners as we consolidate experience levels within the
team as a whole. Headcount at 31 December 2023 was up 8% at 475 (2022: 441).
Average headcount in the period of 463 (2022: 420) was a 10% increase on last
year.
The Company received two approaches from Private Equity houses in the summer.
Neither approach led to a formal offer, and the business continued to focus on
delivering against its objectives.
Net-zero commitment
Our Environmental Impact community was created six years ago and in 2023 a
major milestone was achieved with the company committing to a net-zero target.
We performed a detailed analysis of our emissions, including calculating the
emissions from our supply chain, supported by some external specialists,
following which we decided to align our ambitions with those of the Science
Based Target initiative (SBTi). We submitted our targets to SBTi and had them
validated. We have formally committed to reducing our Scope 1 and Scope 2
emissions by 42% by 2030, along with a commitment to achieve net-zero by 2050,
which entails at least a 90% reduction in emissions with the remainder offset
by carbon removal credits.
Strategic progress
Alfa is a leading asset finance software company with global scale. Our
software 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 and grow our impact faster than headcount,
always retaining our underlying culture. Key to achieving this is delivering
more concurrent Alfa implementations, more efficiently with our world-class
Alfa Systems product. We will have a big company impact, but a small company
feel.
Our strategic priorities are to:
· Strengthen
· Sell
· Scale
· Simplify
We have continued to make good progress in all these areas in 2023, but there
are three areas where we have made particularly strong progress:
· Growth in subscription revenues
· Launch of Alfa Systems 6
· Improvement of the Alfa Development Model
All three areas are covered in more detail below.
Subscription - Strong growth in subscription revenues and TCV
Subscription revenues arise from recurring revenues from subscription
licences, Alfa Cloud and maintenance.
Alfa has been on a journey transitioning from the on-premise perpetual licence
environment to a subscription-based Cloud model. In 2017 we started to offer
Alfa Cloud, a hosted solution and in 2020 won our first Alfa Start customer,
which has the benefit of the speed of implementation of a pre-configured
system hosted in Alfa Cloud paid for on a subscription basis. The demand from
all customers for a subscription-based Alfa Cloud solution, incorporating the
automated monitoring, patching, scheduling and security features, has
increased since then with all of the wins in 2023 being subscription-based
Alfa Cloud solutions. Looking forwards 90% of our late-stage pipeline are
looking to adopt Alfa Cloud and all new customers are looking for a
subscription-based pricing model. We are seeing the strongest growth in our
revenues from the Subscription revenue stream and expect this to continue as
momentum builds.
We have a single-tenant SaaS solution. We and our customers benefit from a
single standard code-set and database, but with multi-layer data segregation
as opposed to code-based segregation used in multi-tenant SaaS models. One of
the big benefits of this approach is that customers can control their release
cycles rather than having a timetable dictated to them. We mitigate the extra
cost from this approach by encouraging customers to share branches and release
dates.
Our 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.
Subscription revenues grew strongly in the period, up 16%, with TCV increasing
28%. The growth in revenues was particularly strong from Alfa Cloud
supplemented by a growing licence base. All customers upgrading from v4 to v5
have moved to Alfa Cloud. We have 13 customers using Alfa Cloud for their
live production environments and have another 3 customers taking hosting
services during the design and implementation phase. Maintenance revenues also
grew strongly with the benefit of price rises and also from the net increase
in live customers.
Software - Exciting roadmap of development
Software revenues arise from development work for new and existing customers,
along with perpetual licence recognition.
Software revenue for the year was down 4% on 2022. Following a very strong
first half of customer funded development days, in the second half, we saw a
reduction as attention moved towards investment for the launch of Alfa Systems
6.
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, through a
balance of customer funded development and self-funded development.
Despite having what we believe is the industry's leading software, we continue
to look for ways to improve our software and also the way we develop the
software. During 2023, we ran a project to refine our Alfa Development Model.
This has resulted in a number of actions being taken, including reorganising
the structure of the Engineering teams to align under product areas, and
reviewing the way we communicate and collaborate to improve the workflow
through the development process. We are already seeing the benefits of this
with improved speed and quality of development.
We release an upgrade every four 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 2023,
we made progress in several valuable and eye-catching new areas, such as Alfa
Compose and Environmental Accounting, which are headline items for our next
major version. Alfa Systems 6 is the sixth major release since Alfa was formed
33 years ago. Announced in the autumn of 2023, Alfa Systems 6 is a functional
upgrade, giving customers access to ten additional modules, and is being
released through the usual four-week upgrade cycle over a number of months, so
can be implemented like any other upgrade and will be frictionless for
customers.
Services - High quality services with a record seven new go-live events
Services revenues arise from work on implementations and other services.
Overall services revenue was up 10% on 2022, with strong chargeability during
the first half but with lower chargeability in the second half due to the
successful delivery of a number of go-lives. We continue to implement a number
of v4 to v5 upgrades, and these accounted for 17% (2022: 14%) of total
services revenue. Other work for existing customers accounted for 50% (2022:
52%) of our services revenue, with the balance of 33% (2022: 34%) from new
implementations. There were sixteen new implementations and v5 upgrades during
2023, with seven of these having go-live events in the year. We have a number
of large customer projects that we expect to start up during H1 2024.
We had seven go-live events in the year: two UK Alfa Start projects, three
automotive finance projects across three continents and two v4 to v5 upgrades
in the UK for equipment finance. In addition, we had an existing customer go
live in a new country, Mexico, although one customer exited a small market
resulting in the total number of countries where we are live remaining at 37.
We also went live with our first African commercial asset finance portfolio,
just over two years after we went live with the customer's retail portfolio.
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 programme 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. For the first time, we have enabled a
partner team member to work on an Alfa Start implementation.
Artificial Intelligence
2023 has seen a rapid growth in interest in how AI may change the ways
companies work, with a particular focus on Generative AI use cases. Alfa has
been a leader on AI for many years: both directly supporting our customers'
digitalisation journeys with AI-based Know Your Customer (KYC) and Anti-Money
Laundering (AML) checks and through our Alfa iQ joint venture.
We set up Alfa iQ over three years ago as a joint venture with Bitfount to
explore the opportunities in the auto and equipment finance markets. Given the
success of our work in Alfa iQ on credit decisioning, delinquency prediction
and business process analytics, we have now consolidated its activities into
Alfa and ended the joint venture relationship.
As AI increasingly becomes a key focus of the customer journey, we believe the
advantages of integrating the thinking and expertise into Alfa outweigh the
advantages of keeping it as a separate standalone entity. We will continue to
build on the strong base of products and modelling techniques that we have
developed in Alfa iQ, and also leverage the tighter integration into the core
Alfa Systems product.
Strong engagement with our people
We have continued to ensure timely and clear communications with our
employees, which was particularly important during 2023 where there were two
possible offers for the Company. We are delighted to see that our retention
rates have improved and now sit at 97%. We are focusing on enhancing our
training programmes both for technical development and to develop our leaders
of the future.
We have settled into a post-COVID working pattern, making the most of
in-person events to maintain our 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 cash conversion of 115% in
2023 being the fourth year in a row in excess of 100%. We continue to generate
more cash than we need for our growth plans and continue to return 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. In the year we paid an ordinary
dividend of 1.2 pence or £3.5m.
We have also made one-off returns of capital through special dividends. In the
year, we paid special dividends of 5.5p per share or £16.2m. This took
total special dividend payments over the last three years to 37.0 pence or
£109m.
In addition to the dividend payments, we announced in January 2022 an 18 month
share buy-back programme which came to an end on 30 June 2023. In 2023, we
purchased 1.9m shares at a cost of £3.1m. This took total purchases since the
programme started to 4.8m shares at cost of £7.7m. All of 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
buy-back program should be launched.
Even after paying dividends of £19.7m and share purchases of £4.8m, we
finished the year with a strong balance sheet with net cash of £21.8m. As a
consequence, the Board is proposing a final dividend of 1.3 pence per share,
8% up on last year (2022: 1.2 pence per share), with an ex-dividend date of 30
May 2024, a record date of 31 May 2024 and a payment date of 27 June 2024. In
addition, the Board has decided to declare a special dividend of 2.0 pence per
share, with an ex-dividend date of 2 May 2024, a record date of 3 May 2024 and
a payment date of 30 May 2024. The special dividend would amount to a total
payment of £5.9m.
Steady market conditions
The macro outlook remains uncertain at the moment, although the recent high
levels of inflation have eased and interest rates may have peaked. Alfa
Systems is operational in 37 countries; in automotive finance, equipment
finance and wholesale and loan finance; for OEMs, banks and independents and
across all asset classes. The breadth and diversity of Alfa's business
interests 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 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. 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. We
continue to see new opportunities entering into our sales pipeline which
supports this. With our functional, flexible, modern, cloud-native system, we
continue to be well positioned to capitalise on that end market demand.
Strong pipeline
We are pleased to have converted two prospects in the late-stage pipeline in
recent months with up to four more expected to convert in the near future. In
total, we have 11 prospects in the late stage, ten of which are at preferred
supplier status and five where we are already performing paid work under
letters of engagements 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 completed
the implementation, all within the calendar year.
Overall, we remain confident in both the demand for our software and our
ability to win work in the market.
Outlook
The asset and automotive finance markets have continued to remain strong
through 2023 despite broader macro uncertainty with demand for software
remaining robust. Alfa continues to see software projects proceed, new sales
close and new opportunities enter our pipeline.
We expect 2024 revenue growth to be mid to high single digits driven by
continuing strong growth in subscription. Within this performance, we
anticipate a greater weighting in the second half of the year as new sales
come fully on stream. Our encouraging new business pipeline, confidence in
the outlook and our strategy means that Alfa will continue to invest in our
technology and people, whilst continuing to return cash to shareholders
through our sustainable, progressive dividend.
FINANCIAL REVIEW
Financial results
Movement
£m 2023 2022 %
Revenue 102.0 93.3 9%
Gross profit 63.7 59.9 6%
Operating profit 30.1 29.6 2%
Profit before tax 29.6 28.9 2%
Taxation (6.1) (4.4) 39%
Profit for the period 23.5 24.5 (4)%
Basic EPS 7.99p 8.24p (3)%
Diluted EPS 7.90p 8.09p (2)%
Revenues increased by 9% or £8.7m to £102.0m in the 12 months ended 31
December 2023 (2022: £93.3m). Growth at constant currency was also 9%.
Gross profit increased 6% to £63.7m (2022: £59.9m) slightly behind the
increase in revenue mainly due to increased headcount and salary inflation,
with operating profit increasing by 2% or £0.5m to £30.1m (2022: £29.6m)
with profit before tax of £29.6m (2022: £28.9m).
The Effective Tax Rate (ETR) for 2023 is 20.6% (2022: 15.2%) which increased
over 2022 largely due to the increase in the UK Corporation Tax rate. The
resulting profit for the period was £23.5m (2022: £24.5m).
Revenue
Revenue - by type 2023 2022 Movement
£m %
Subscription 31.8 27.4 16%
Software 15.6 16.3 (4)%
Services 54.6 49.6 10%
Total revenue 102.0 93.3 9%
Subscription revenues
Overall subscription revenues increased strongly by 16% to £31.8m (2022:
£27.4m), with growth across all three elements of licence, maintenance and
hosting driven from both existing and new customers. All new customers in the
late-stage pipeline are looking for a subscription licence contract, with 90%
looking to utilise Alfa Cloud.
Software revenues
Software revenues of £15.6m were down £(0.7)m or 4% on last year (2022:
£16.3m), due to a reduction in the recognition of customised licences from
perpetual licence customers, as we focus on moving customers to a subscription
model. Development work for existing customers was heavily weighted towards
the first half of the year, but overall was in line with 2022. There were
one-off licence revenues of £0.5m (2022: £0.4m) .
Services revenues
Total services revenues increased by 10% to £54.6m (2022: £49.6m) at actual
exchange rates. Growth was broadly spread and came from both implementation
revenues for new customers and also 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 stream
£m 2023 2022 Movement
%
Subscription 119.5 93.3 28%
Software 17.8 20.1 (11)%
Services 28.0 29.5 (5)%
Total TCV 165.3 142.9 16%
Total contract value (TCV) increased over last year by 16% to £165.3m,
significantly boosted by two large contracts signed in the year offset by the
completion of one large project. Subscription TCV has increased 28%, driven by
strong growth in both hosting and licence subscriptions. There was a 11%
decrease in Software TCV, principally from a reduction in the as yet
unrecognised customised licence as we transition to subscription licences.
Services TCV of £28.0m was down 5% versus this time last year due to a lower
level of activity in advance of new contracts being signed and started.
TCV - by type for next 12 months
£m 2023 2022 Movement
%
Subscription 37.1 30.1 23%
Software 8.7 10.2 (15)%
Services 21.2 24.7 (14)%
Total TCV 67.0 65.0 3%
Of the TCV at 31 December 2023, £67.0m (31 Dec 2022: £65.0m) is anticipated
to convert into revenue within the next 12 months. Within this subscription
TCV is up strongly by 23% to £37.1m (2022: £30.1m) on the back of two new
contracts, software TCV of £8.7m (2022: £10.2m) is down 15% due to the
reduction in unrecognised customised licence, with services TCV down 14% to
£21.2m (2022: £24.7m). We expect this to increase as new contracts start.
Operating profit
The Group's operating profit increased by £0.5m, or 2%, to £30.1m in 2023
(2022: £29.6m) primarily reflecting the net benefit of increasing revenues
net of operating costs.
Headcount numbers were up 8% at 31 December 2023 at 475 (2022: 441), with
average headcount of 463 up 10% on last year (2022: 420). Staff retention rate
was very strong through 2023 and was at 97% at 31 December 2023 (2022: 90%).
Expenses - net 2023 2022 Movement
£m %
Cost of sales 38.3 33.4 15%
Sales, general and administrative expenses* 34.0 32.1 6%
Other income, FX and one-off costs* (0.4) (1.8) (78%)
Total expenses - net 71.9 63.7 13%
* FX gains and losses and fair value movement on FX forward contracts as well
as the one-off aborted transaction costs have been removed from SG&A to
better show underlying costs, and have been shown together with other income
in the table above.
Cost of sales increased by £4.9m to £38.3m (2022: £33.4m) to support the
growth in the business. This was due to higher headcount, in both our
implementation and engineering teams along with pay increases. Hosting costs
increased from the strong growth in Alfa Cloud.
Sales, general and administrative (SG&A) costs increased to £34.0m in the
year (2022: £32.1m). Salary costs were up 12% in the period to £46.8m
(2022: £41.8m) due to higher headcount and pay increases. Profit Share Pay,
including employer's costs, in the period was £3.8m (2022: £3.5m).
Share-based payment charges have decreased over last year at £1.6m (2022:
£1.8m), principally due to lower provision for NI costs from a lower share
price at yearend. Other costs increased 11% to £15.6m (2022: £14.0m) with
cost patterns returning to normal along with the impact of inflation.
Other income, FX and one-off costs decreased by 78% since 2022. Included
within this is £0.5m (2022: nil) of income related to the Research &
Development expenditure credit ("RDEC") scheme which we qualified for in 2023
for the first time, with reduction in sub-letting income in FY 23 due to be
office space being assigned in 2022. Legal & other costs related to
possible offers for the company were £0.6m (2022: £nil). There was a net
gain of £0.3m (2022: £1.1m) from FX gains and losses and fair value movement
on FX forward contracts.
We have continued to invest in our product, with total investment increasing
in 2023 to £35.0m (2022: £29.1m). This investment is calculated based on the
total time spent by people in our Product Engineering team working on Alfa
Systems product either for specific customer developments, which are largely
chargeable, or internal investment and enhancement of the product. It does not
include time spent on implementing or maintaining and supporting systems for
customers. It includes salary costs and a full overhead allocation, and
includes amounts shown as R&D expense and costs that have been
capitalised.
Profit before Tax
Net finance costs reduced to £0.2m (2022: £0.6m) benefiting from a full year
of reduced lease costs and interest income of £0.3m (2022: £nil). Overall
Profit before Tax of £29.6m was up 2% on last year (2022: £28.9m).
Profit for the period
Profit after taxation decreased by £1.0m, or 4%, to £23.5m (2022:
£24.5m). The Effective Tax Rate (ETR) for the year increased to 20.6%
(2022: 15.2%) as a result of the increase in the UK corporation tax rate, net
of the benefit from prior year credits of £1.2m principally due to the last
year of operating under the R&D tax credit scheme. For the full year 2024,
we expect the ETR to be around 26% due to the full year effect of the increase
in the UK Corporation Tax rate to 25% along with the loss of the R&D tax
credit which has been replaced by RDEC scheme, which is shown in other income
and not within the tax charge.
Earnings per share
Basic earnings per share decreased by 3% to 7.99 pence (2022: 8.24 pence) on
the increased tax charge. Diluted earnings per share decreased by 2% to 7.90
pence (2022: 8.09 pence).
Cash flow
Cash generated from operations was very strong at £39.2m in the period (2022:
£34.0m) up £5.2m on last year. Net cash generated from operating activities
was also very strong at £32.2m (2022: £27.2m) with tax payments of £6.5m up
on the £6.2m for 2022.
Net cash (including the effect of exchange rate changes) increased by £3.1m
to £21.8m at 31 December 2023. In the year the 2022 final dividend and two
special dividends were paid, totalling £19.7m (2022: £22.5m). In addition,
the purchase of own shares was £4.8m (2022: £5.6m) for both the share
buy-back, which ended in June 2023, and to fund the Employee Benefit Trust
(EBT). Net capital expenditure of £3.4m was up on last year (2022: £2.3m)
with increased capitalisation of software, as expected, up to £2.8m (2022:
£1.5m) and with other capex of £0.6m (2022: £0.8m) principally due to
investment in IT equipment.
Operating free cash flow conversion
£m 2023 2022
Cash generated from operations 39.2 34.0
Adjusted for:
Capital expenditure (3.4) (2.3)
Principal element of the lease payments in respect of IFRS 16 (1.3) (1.6)
Operating free cash flow 34.5 30.1
Operating profit 30.1 29.6
Operating free cash flow conversion 115% 102%
The Group's Operating Free Cash Flow Conversion (FCF) of 115% (2022: 102%) was
very strong, benefiting from extremely prompt payment by customers at year
end. As noted before, over time the ongoing trend for 12 month cash conversion
will be around 100% as we move to a subscription model.
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 31 December 2023
are detailed below.
Other intangible assets have increased by £2.1m to £5.0m (2022: £2.9m) due
to additions to capitalised development costs.
Right of Use Assets and total Lease Liabilities have decreased by £1.0m and
£1.1m respectively due to depreciation charges and lease payments made in the
year.
Trade receivables reduced by £3.3m to £5.6m at 31 December 2023 (31 December
2022: £8.9m) with very strong cash collection at yearend. Accrued income
reduced to £4.6m (31 December 2022: £6.5m) due to prompt billing.
Corporation tax receivable has increased to £1.9m (2022: £0.2m) due to tax
payments made during the year and the impact of the R&D tax claims.
Trade and other payables balance increased by £0.5m to £10.0m at 31 December
2023 (31 December 2022: £9.5m).
Contract liabilities reduced slightly by £0.6m to £14.2m at 31 December 2023
(31 December 2022: £14.8m) due to a small reduction in the deferred licence
balances.
Capital allocation and distributions
The Group has had very strong cash generation over a number of years and we
expect to continue to be cash-generative going forwards. The Group's capital
allocation policy takes into consideration the need to continue to invest in
our people and technology whilst maintaining strong liquidity. We wish to
retain a degree of optionality for future investment which we can assess at
the time.
Over the three years since November 2020, ordinary dividends of £9.8m and
special dividends of £109.4m for a total of £119.2m have been paid. In
addition, we purchased 4.8 million shares at a cost of £7.7m through the
share buy-back programme which finished in June 2023. Therefore, over the last
three years, there has been a return of over £125m to shareholders.
The Board intends to progressively increase the ordinary dividend as the Group
grows, whilst ensuring that we retain a strong balance sheet.
For 2023, we are proposing an ordinary dividend of 1.3 pence per share,
amounting to £3.8m, with an ex-dividend date of 30 May 2024. In addition, we
have declared a special dividend of 2.0 pence per share, amounting to £5.9m
with an ex-dividend date of 2 May 2024.
Going concern
The financial statements are prepared on the going concern basis. The Group
continues to be cash generative and the Directors believe that the Group has a
resilient business model. The Group meets its day-to-day working capital
requirements through its cash reserves generated from operating activities.
The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, show that the Group has sufficient cash
reserves to continue to operate for a period of not less than 12 months from
the date of approval of these financial statements. The going concern
assessment also includes downside stress testing in line with FRC guidance
which demonstrates that even in the most extreme downside conditions
considered reasonably possible, given the existing level of cash held, the
Group would continue to be able to meet its obligations as they fall due,
without the need for substantive mitigating actions. On this basis, the
Directors consider it appropriate to continue to adopt the going concern basis
of accounting in preparing the financial statements.
Subsequent events and related parties
There are no subsequent events that require disclosure. Details about related
party transactions are disclosed in note 32.
Duncan Magrath
Chief Financial Officer
13 March 2024
DEFINITIONS
Constant currency
When the Company believes it would be helpful for understanding trends in its
business, the Company provides percentage increases or decreases in its
revenues or operating profit to eliminate the effect of changes in currency
values. When trend information is expressed herein "in constant currencies",
the comparative results are derived by re-calculating comparative non-GBP
denominated revenues 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:
2023 2022
Unaudited £m £m
Cash generated from operations 39.2 34.0
Capital expenditure (3.4) (2.3)
Principal element of lease payments (1.3) (1.6)
Operating FCF generated 34.5 30.1
Operating profit 30.1 29.6
Operating FCF Conversion 115% 102%
Total contract value (TCV)
Total contract value ("TCV") - TCV is calculated by analysing future contract
revenue based on the following components:
(i) an assumption of three years of Subscription payments (including
maintenance, Cloud Hosting and subscription licence) assuming these services
continued as planned (actual contract length varies by customer);
(ii) the estimated remaining time to complete Services and Software
deliverables within contracted software implementations, and recognise
deferred licence amounts (which may not all be under a signed statement of
work); and
(iii) Pre-implementation and ongoing Services and Software work which is
contracted under a statement of work. As TCV is a reflection of future
revenues, forward looking exchange rates are used for the conversion into
GBP. The exchange rates used for the TCV calculation are as follows:
Exchange rates used for TCV H2 2023 H1 2023 H2 2022
USD 1.25 1.30 1.25
EUR 1.15 1.18 1.18
Consolidated statement of profit or loss and comprehensive income
£m Note 2023 2022
Continuing operations
Revenue 5 102.0 93.3
Cost of sales (38.3) (33.4)
Gross profit 63.7 59.9
Sales, general and administrative expenses (34.3) (31.0)
Other income 0.7 0.7
Operating profit 6 30.1 29.6
Share of net loss of joint venture 19 (0.3) (0.1)
Profit before net finance costs and tax 29.8 29.5
Finance income 10 0.3 -
Finance expense 10 (0.5) (0.6)
Profit before taxation 29.6 28.9
Taxation 11 (6.1) (4.4)
Profit for the financial year 23.5 24.5
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations 27 (0.2) 0.4
Other comprehensive (loss)/income net of tax (0.2) 0.4
Total comprehensive income for the year 23.3 24.9
Earnings per share (in pence) for profit attributable
to the ordinary equity holders of the Company
Basic 12 7.99 8.24
Diluted 12 7.90 8.09
The above consolidated statement of profit or loss and comprehensive income should be read in conjunction with the accompanying notes.
Consolidated statement of financial position
£m Note 2023 2022
Assets
Non-current assets
Goodwill 14 24.7 24.7
Other intangible assets 15 5.0 2.9
Property, plant and equipment 16 1.0 1.0
Right-of-use assets 17 6.1 7.1
Deferred tax assets 18 0.3 1.6
Interests in joint venture 19 - 0.2
Total non-current assets 37.1 37.5
Current assets
Trade receivables 20 5.6 8.9
Accrued income 21 4.6 6.5
Prepayments 21 3.8 4.5
Other receivables 21 0.3 0.2
Corporation tax recoverable 21 1.9 0.2
Cash and cash equivalents 22 21.8 18.7
Total current assets 38.0 39.0
Total assets 75.1 76.5
Liabilities and equity
Current liabilities
Trade and other payables 23 10.0 9.5
Lease liabilities 24 1.4 1.3
Contract liabilities 23 14.2 14.8
Total current liabilities 25.6 25.6
Non-current liabilities
Lease liabilities 24 6.8 8.0
Provisions for other liabilities 25 0.7 0.9
Total non-current liabilities 7.5 8.9
Total liabilities 33.1 34.5
Capital and reserves
Share capital 26 0.3 0.3
Translation reserve 27 0.2 0.4
Own shares 28 (8.7) (7.5)
Retained earnings 50.2 48.8
Total equity 42.0 42.0
Total liabilities and equity 75.1 76.5
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes.
Consolidated statement of changes in equity
£m Note Share capital Own Translation reserve Retained earnings Equity attributable to owners of the parent
shares
Balance as at 1 January 2022 0.3 (3.4) - 46.5 43.4
Profit for the financial year - - - 24.5 24.5
Other comprehensive income - - 0.4 - 0.4
Total comprehensive income for the year - - 0.4 24.5 24.9
Transactions with owners in their capacity as owners:
Equity-settled share-based payment schemes 29 - - - 1.5 1.5
Equity-settled share-based payment schemes - deferred tax impact 18 - - - 0.1 0.1
Dividends 31 - - - (22.5) (22.5)
Own shares distributed 28 - 1.5 - (1.3) 0.2
Own shares acquired 28 - (5.6) - - (5.6)
Balance as at 31 December 2022 0.3 (7.5) 0.4 48.8 42.0
Profit for the financial year - - - 23.5 23.5
Other comprehensive (loss) - - (0.2) - (0.2)
Total comprehensive income for the year - - (0.2) 23.5 23.3
Transactions with owners in their capacity as owners:
Equity-settled share-based payment schemes 29 - - - 1.5 1.5
Equity-settled share-based payment schemes - deferred tax impact 18 - - - (0.5) (0.5)
Dividends 31 - - - (19.7) (19.7)
Own shares distributed 28 - 3.6 - (3.4) 0.2
Own shares acquired 28 - (4.8) - - (4.8)
Balance as at 31 December 2023 0.3 (8.7) 0.2 50.2 42.0
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated statement of cash flows
£m Note 2023 2022
Cash flows from operating activities
Profit before tax 29.6 28.9
Net finance costs 0.2 0.6
Share of net loss from joint venture 0.3 0.1
Operating profit 30.1 29.6
Adjustments:
Depreciation 6/16/17 1.8 2.2
Amortisation 6/15 0.7 0.8
Share-based payment charge 29 1.6 1.8
RDEC tax credit 6 (0.5) -
Net gain on disposal of assets - (0.3)
Movement in provisions 25 (0.2) (0.5)
Movement in working capital:
Movement in contract liabilities 23 (0.6) 3.8
Movement in trade and other receivables 20/21 5.8 (3.6)
Movement in trade and other payables (excluding contract liabilities) 23 0.5 0.2
Cash generated from operations 39.2 34.0
Interest element on lease payments 10/24 (0.4) (0.6)
Other interest paid 10 (0.1) -
Income taxes paid (6.5) (6.2)
Net cash generated from operating activities 32.2 27.2
Cash flows from investing activities
Purchases of property, plant and equipment 16 (0.6) (0.7)
Purchases of computer software 15 - (0.1)
Payments for internally developed software 15 (2.8) (1.5)
Interest received 10 0.3 -
Net cash used in investing activities (3.1) (2.3)
Cash flows from financing activities
Dividends paid to Company shareholders 31 (19.7) (22.5)
Principal element on lease payments 24 (1.3) (1.6)
Purchase of own shares 28 (4.8) (5.6)
Cash used in financing activities (25.8) (29.7)
Net increase/(decrease) in cash 3.3 (4.8)
Cash and cash equivalents at the beginning of the year 22 18.7 23.1
Effect of foreign exchange rate changes on cash and cash equivalents (0.2) 0.4
Cash and cash equivalents at the end of the year 22 21.8 18.7
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
Notes to the consolidated financial statements for the year ended 31 December
2023
1. Summary of significant accounting policies
This note provides a list of the significant accounting policies adopted in
the preparation of these consolidated financial statements. These policies
have been consistently applied to all the years presented, unless otherwise
stated. The financial statements are for the Group, consisting of Alfa
Financial Software Holdings PLC (Alfa or the Company), its subsidiaries and
joint venture, and are presented to the nearest £0.1m unless otherwise
stated.
The principal activity of the Group is to provide software solutions and
consultancy services to the auto and equipment finance industry in the
United Kingdom, North America, Europe, Australasia and Africa.
1.1 Basis of preparation
Statement of Compliance
The preliminary results for the year ended 31 December 2023 are prepared in
accordance with UK adopted International Accounting Standards (IAS) and
interpretations by the IFRS Interpretations Committee applicable to companies
reporting under UK adopted IFRS. They do not include all the information
required for full annual statements and should be read in conjunction with the
2023 Annual Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year ended 31
December 2023.
The financial information has been extracted from the financial statements for
the year ended 31 December 2023, which have been approved by the Board of
Directors on 13 March 2024. They have been reported on by the Group's auditors
and will be delivered to the Registrar of Companies in due course. The report
of the auditors was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The comparative figures for the financial year 31 December 2022 have been
extracted from the Group's statutory accounts for that financial year. The
Board of Directors approved the 2022 Group financial statements on 1 March
2023, and they have been delivered to the Registrar of Companies. The report
of the auditors was (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The financial information contained in this announcement does not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006.
Compliance with IFRS
The Consolidated Financial Statements of the Group have been prepared in
accordance with the Companies Act 2006 and with United Kingdom adopted
International Accounting Standards.
Historical cost convention
The consolidated financial statements have been prepared under the historical
cost convention, other than the revaluation of financial assets and financial
liabilities recorded at fair value through profit or loss.
Going concern
The financial statements are prepared on the going concern basis. The Group
continues to be cash-generative and the Directors believe that the Group has a
resilient business model. The Group meets its day-to-day working capital
requirements through its cash reserves generated from operating activities.
The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, show that the Group has sufficient cash
reserves to continue to operate for a period of not less than 12 months from
the date of these financial statements.
The going concern assessment also includes downside stress testing in line
with FRC guidance which demonstrates that even in the most extreme downside
conditions considered reasonably possible, given the existing level of cash
held, the Group would continue to be able to meet its obligations as they
fall due.
On this basis, the Directors consider it appropriate to continue to adopt the
going concern basis of accounting in preparing the financial statements.
New and amended standards adopted by the Group
In the current year, the Group has applied a number of amendments to IFRS
Accounting Standards issued by the International Accounting Standards Board
(IASB) that are mandatorily effective for an accounting period that begins on
or after 1 January 2023. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial statements. The
amendments relevant to the Group are:
· Amendments to IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction;
· Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates;
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2 Disclosure of Accounting policies; and
· Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture.
New standards, amendments and interpretations not yet adopted
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRS Standards that have been issued but
are not yet effective:
· Amendments to IAS 1 - Non-current liabilities with covenants;
Amendments to IFRS 16 - Leases on sale and leaseback; Amendments to IAS 7 and
IFRS 7 - Supplier finance; and Amendments to IAS 21 - Lack of Exchangeability.
The adoption of these is not expected to have a material impact on the
financial statements of the Group.
1.2 Group structure
Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group.
Unless otherwise stated, subsidiaries have share capital consisting solely of
ordinary shares, and the proportion of ownership interests held equals the
voting rights held by the Group. The country of incorporation or registration
is also each subsidiary's principal place of business.
All intra-Group transactions, balances, income and expenses are eliminated on
consolidation. All subsidiaries have a 31 December year end.
The Group exercises control over the employee benefit trust because it is
exposed to, and has a right to, variable returns from this trust and is able
to use its power over the trust to affect those returns. The trust is
therefore consolidated by the Group.
Joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other
parties undertake an economic activity that is subject to joint control; that
is, when the relevant activities that significantly affect the investee's
returns require the unanimous consent of the parties sharing control.
Joint control is the contractually agreed sharing of control of an
arrangement, and exists only when decisions about the activities
that significantly affect the arrangement's returns require the unanimous
consent of the parties sharing control. Judgement
is required in determining this classification through an evaluation of the
facts and circumstances arising from each individual arrangement. Joint
arrangements are classified as either joint operations or joint ventures based
on the rights and obligations of the parties to the arrangement. In joint
operations, the parties have rights to the assets and obligations for the
liabilities relating to the arrangement, whereas in joint ventures, the
parties have rights to the net assets of the arrangement.
Alfa only has one joint venture, namely Alfa iQ Limited, which was formed in
May 2020. The investment in the joint venture is accounted for using the
equity method. The Group's share of the joint venture's net profit/(loss) is
based on its most recent financial statement drawn up to the Group's balance
sheet date. The total carrying value of investment in the joint venture
represents the cost of the investment, including loans which form part of the
net investment in the joint venture, plus the share of post-acquisition
retained earnings and any other movements in reserves less any impairment in
the value of the investment.
The carrying values of joint ventures are reviewed on a regular basis and if
there is objective evidence that an impairment in value has occurred as a
result of one or more events during the period, the investment is impaired.
The Group's share of the joint venture's losses in excess of its interest in
that joint venture is not recognised to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of the joint
venture. Unrealised gains arising from transactions with joint ventures are
eliminated against the investment to the extent of the Group's interest in the
investee. Unrealised losses are eliminated in the same way, but only to the
extent that there is no evidence of impairment.
Loans to the joint venture are measured at fair value on initial recognition,
and subsequently carried at amortised cost. Any surplus between the nominal
and fair value of the loan is recognised as an investment in the joint
venture.
The activity in Alfa IQ is being brought fully into the Group. As a result,
the Alfa iQ joint venture ceased its activity in late 2023 and the structure
is now in the process of being formally dissolved.
1.3 Segment reporting
Operating and reporting segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker (CODM). The
Group's Chief Executive Officer (CEO), who is responsible for allocating
resources and assessing performance, has been identified as the CODM.
The CODM regularly reviews the Group's operating results in order to assess
performance and to allocate resources. The CODM considers the business from a
product perspective and, therefore, recognises one operating and reporting
segment, being the sale of software and related services. The Group splits
revenue by type of activity but reports operating results on a consolidated
basis, as presented to the CODM, along with the required entity wide
disclosures.
The Group discloses revenue split by type of activity, being Subscription,
Software and Services.
a. Subscription revenues include recurring revenues paid on
a monthly or annual basis, including subscription licence revenues,
maintenance and cloud hosting.
b. Software revenues include revenues from the recognition of
customised licence revenue, one-off licence fees and any
development revenues.
c. Services revenues are revenues from any work done for
customers including pre-implementation, implementation work, and ongoing
services, but excludes any revenue from development work which is disclosed in
Software.
See note 1.5 for details of our revenue recognition accounting policy and note
2 for the critical accounting judgements and estimates in relation to revenue
recognition.
1.4 Foreign currency translation
Functional currency
Items included in the consolidated financial statements of each of the Group's
subsidiaries are measured using their functional currency. The functional
currency of the parent and each subsidiary is the currency of the primary
economic environment in which the entity operates. See applicable exchange
rates used in 2023 and 2022 below:
2023 2022
Closing Average Closing Average
USD 1.27 1.24 1.21 1.24
EUR 1.15 1.15 1.13 1.17
NZD 2.01 2.02 1.90 1.95
AUD 1.87 1.87 1.77 1.78
Presentation currency
The consolidated financial statements are presented in pounds sterling. The
Company's functional and presentation currency is pounds sterling.
Group companies
The results and financial position of foreign operations (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
· Assets and liabilities for each consolidated statement of
financial position presented are translated at the closing rate at the date
of that consolidated statement of financial position;
· Income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average exchange rates
(unless this is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
· All resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the translation of any net
investment in foreign entities are recognised in other comprehensive income.
When a foreign operation is sold, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
Foreign currency transactions
Transactions in foreign currencies are translated into the respective
functional currencies using the exchange rates prevailing at the dates of the
transactions. Foreign exchange differences arising from the settlement of such
transactions and from the translation at the reporting date of monetary
assets and liabilities denominated in foreign currencies are recognised in
profit or loss. See applicable exchange rates used by the Group above.
1.5 Revenue recognition
The Group derives revenue by type of activity being Subscription, Software and
Services (as disclosed in note 1.3).
i Subscription revenue includes the periodic rights to use
Alfa Systems, periodic maintenance, subscription (including cloud hosting) and
one-off revenue relating to catch-up periodic maintenance;
ii Software revenue includes development revenue (part of
the customised licence revenue), options over the right to use Alfa Systems,
and one-off licence fees; and
iii Services revenue includes software implementation
services.
The Group provides the right to use, software development services, core
implementation services and ongoing support of its product, Alfa Systems. The
Group's contractual arrangements contain multiple deliverables or services,
such as the development or customisation of the software to the customer's
requirements, implementation services such as migration of data and testing,
and certain project management services.
Alfa assesses whether there are distinct performance obligations at the start
of each contract and throughout the performance of the implementation,
development and services projects and maintenance period. These performance
obligations are laid out below.
Any one contract may include a single performance obligation or a combination
of those listed below:
1.5.1 Software implementation services
Where implementation services are considered to be distinct, i.e. when
relatively straightforward, do not require additional development services
and could be performed by an external third party, the implementation
services are accounted for as a separate performance obligation from any
development services.
When a customer is in the process of implementing the software, the
transaction price is allocated to this based on the stand-alone selling prices
(derived from standard day rates) and is recognised over time based on the
effort incurred, limited to the amount to which Alfa has a right to payment.
Over time recognition is considered appropriate as customers simultaneously
receive and consume the benefits provided. For customers under the Group's
subscription-based contracts that are undergoing implementation, revenue for
software implementation services is deemed to be distinct from any other
performance obligation and is recognised based on a percentage-of-completion
basis.
When the type of services provided are ongoing services, the transaction price
is deemed to be the actual day rate, and revenue is recognised at a point in
time as the service is provided.
1.5.2 Development services and licence services (the customised licence)
Another performance obligation is the granting of a right to use Alfa Systems,
which includes the delivery of the related software licence and any
development efforts which change the underlying code.
During the initial phase of implementing the software, the total revenue
attributable to this performance obligation is estimated at the outset of the
relevant software implementation project and recognised as the effort is
expended, on a percentage-of-completion basis, limited to the amount of
revenue to which Alfa has the right to payment. See note 5.6 for the
accounting policy for variable consideration. A percentage-of-completion
basis has been used because customers obtain the ability to benefit from the
product from the start of the implementation project; the development or
customisation of the asset is tailored to the customer's specific
requirements; and the customer is entitled to the benefits of the efforts as
at the date the efforts are delivered, so recognition over time
is appropriate.
Revenue attributable to development services is valued using the residual
value method as there are no stand-alone selling prices which are observable,
as each project is customised. For customers under the Group's
subscription-based contracts that are undergoing implementation, revenue for
development services is deemed to be distinct from any other performance
obligation and is recognised based on a percentage-of-completion basis.
Once the customer is already using the software and the services provided are
ongoing development, the transaction price is deemed to be the actual day rate
and revenue is recognised at a point in time as the development service is
provided.
1.5.3 Option over the right to use Alfa Systems
In the event that perpetual licence customers have to pay periodic maintenance
fees in order to keep using Alfa Systems, a component of these future
maintenance fees is attributable to the right to use the software. In these
circumstances, the licence granted by Alfa is considered to renew in future
periods. There may be a material right in respect of discounts in future
periods. In order to ascribe a value to this option, management annualises the
value of the customised licence performance obligation and compares it to the
annual right to use software performance obligation post go live.
The value of this option is built up from the start of the implementation
project in line with the percentage of completion of development revenue
described in note 1.5.2 above. Following the completion of the implementation
project, the value of this option is recognised evenly over the expected
remaining customer life.
1.5.4 Periodic right to use Alfa Systems
When a customer pays its maintenance fee annually, this performance obligation
represents the proportion of this fee which relates to the periodic option to
renew the right to use Alfa Systems. If there is the right of clawback of the
annual right to use, such amounts are recognised throughout the annual period.
If there is no right of clawback, then the annual right to use amount is
recognised in full when there is a right of collection.
When a customer pays for its maintenance fee as part of a subscription
contract (see note 1.5.6 below), it will not be treated as a separate
performance obligation (and will instead be part of the subscription amount).
1.5.5 Periodic maintenance amounts
This represents the stand-alone selling price of the ongoing support or
maintenance of Alfa Systems which is recognised throughout the period over
which the services are delivered.
1.5.6 Subscription amounts
Certain of the Group's implementation and service contracts include a
subscription payment mechanism. This represents a monthly fee charged to the
customer covering one or more of the following performance obligations: the
provision of monthly hosting services; the monthly periodic right to use Alfa
Systems; and the provision of monthly maintenance services (when this becomes
applicable to the customer). The monthly payments are recognised as revenue in
the period to which they relate. This reflects the underlying performance
obligations of the Group and termination rights of the customer.
1.5.7 One-off revenue amounts
From time to time, the Group is entitled to receive one-off licence revenue
from its customers as they increase the number of contracts on their version
of Alfa Systems. Additionally, there are times when catch-up periodic
maintenance amounts are entitled to be received by the Group, also as a
result of the increased number of contracts. Generally, this revenue is
recognised at the point in time it is invoiced, or becomes contractually
payable, reflecting the fact that the Group has no remaining performance
obligations to satisfy.
Capitalised sales incentive costs
The Group incentivises its sales force for securing sales. In line with IFRS
15, these costs are capitalised and are amortised in line with the percentage
of completion of the software implementation project.
Costs to fulfil contracts
The Group has recognised an asset in relation to employee costs to fulfil its
long-term development contracts (as disclosed in note 21). These costs relate
directly to the contracts, generate or enhance resources to be used to satisfy
performance obligations in the future and are expected to be recovered. This
asset is presented within prepayments in the statement of financial position.
These costs are amortised within cost of sales in line with the percentage of
completion of the development project.
1.6 Operating expenses
Operating expenses include items such as personnel costs (including training
and recruitment), cost of software not capitalised, research and development
costs, and other infrastructure expenses. These items have been grouped into
the following categories for disclosure purposes:
· Cost of sales - This includes salaries and other direct costs
associated with satisfying customer contracts (including hosting costs) and
for developing software.
· Sales, general and administrative expenses - This includes all
the residual operating costs.
1.7 Income tax
Taxation expense for the year comprises current and deferred tax recognised in
the reporting period. Tax is recognised in profit and loss, except to the
extent that it relates to items recognised in other comprehensive income or
directly in equity. Current or deferred taxation assets and liabilities are
not discounted.
Current tax
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the reporting date in the countries where
the Group and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Under the R&D Expenditure Credit (also referred to as the 'RDEC') scheme,
the Group has received a tax credit based on qualifying R&D expenditure.
This tax credit is recognised within pre-tax income, as 'Other Income'.
Deferred tax
Deferred income tax is recognised, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the Group's consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting
nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which the temporary
differences can be utilised. Deferred income tax assets and liabilities are
offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes, assets and
liabilities relate to income taxes levied by the same taxation authority on
either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
1.8 Leases
Alfa enters into lease contracts in respect of various properties and motor
vehicles. These rental contracts are typically made for fixed periods of two
to ten years, and sometimes have extension options. Lease terms are negotiated
on an individual basis and contain a wide range of different terms and
conditions. In accordance with IFRS 16, leases are recognised as a
right-of-use asset with a corresponding liability, at the date at which the
leased asset is available for use by Alfa. These assets and liabilities are
initially measured on a present value basis (as set out in more detail below),
with each subsequent lease payment allocated between the liability and finance
cost. The finance cost is charged to profit or loss over the lease period to
produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a straight-line
basis.
Alfa assesses whether a contract is, or contains, a lease at inception of the
contract. The Group recognises a right-of-use asset and a corresponding lease
liability, with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of 12
months, or less) and leases of low-value assets. For these leases, the Group
recognises the lease payments as an expense on a straight-line basis over the
term of the lease, unless another systematic basis is more representative
of the time pattern in which economic benefits from the leased assets are
consumed.
Lease liabilities
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in substance fixed payments),
less any lease incentives;
· Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· The amount expected to be payable by the lessee under residual
value guarantees;
· The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
· Penalties for terminating the lease, if the lease term reflects
the exercise of an option to terminate the lease.
The lease liability is presented in separate lines, split between current and
non-current liabilities, in the consolidated statement of financial position.
It is subsequently measured by increasing the carrying amount to reflect
interest on the lease liability (using the effective interest method) and by
reducing the carrying amount to reflect the lease payments made.
The Group re-measures the lease liability (and makes a corresponding
adjustment to the related right-of-use asset) whenever:
· The lease term has changed, or there is a change in the
assessment of exercise of a purchase option, in which case the lease liability
is re-measured by discounting the revised lease payments using a revised
discount rate;
· The lease payments change due to changes in an index, or rate, or
a change in expected payment under a guaranteed residual value. In these
cases, the lease liability is re-measured by discounting the revised lease
payments, using the initial discount rate (unless the lease payments change is
due to a change in a floating interest rate, in which case a revised discount
rate is used); and
· A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
re-measured by discounting the revised lease payments using a revised
discount rate.
Right-of-use assets
The right-of-use assets comprise:
· The initial measurement of the corresponding lease liability;
· Lease payments made at, or before, the commencement day;
· Any initial direct costs; and
· Restoration cost.
The right-of-use assets are presented as a separate line in the consolidated
statement of financial position.
The right-of-use assets are subsequently measured at cost less accumulated
depreciation and impairment losses (if applicable). They are depreciated from
the commencement date of the lease and over the shorter period of the lease
term and useful life of the underlying asset. If a lease transfers ownership
of the underlying asset, or the cost of the right-of-use asset reflects an
expectation that the Group will exercise a purchase option, the related
right-of-use asset is depreciated over the useful life of the underlying
asset. Currently, the Group does not have any leases that include a purchase
option, or transfer ownership of the underlying asset.
Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located, or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37.
Extension options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended (or not
terminated). The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this assessment and
that is within the control of the lessee. During the current financial period,
there have been no changes in such assessments.
Variable rents that do not depend on an index, or rate, are not included in
the measurement of the lease liability and the right-of-use asset. The related
payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included as an expense
in the consolidated statement of profit or loss and comprehensive income.
1.9 Impairment of non-financial assets
Goodwill is tested annually for impairment. The carrying amount is allocated
to the cash-generating unit (CGU) that is expected to benefit from investment
and which represents the lowest level at which the goodwill is monitored for
internal management purposes. The carrying value of the CGU is then compared
to the higher of its fair value less costs of disposal and its value in use.
Any impairment attributed to the goodwill is recognised immediately as an
expense and is not subsequently reversed.
Other assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount might not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
1.10 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as
short-term deposits with original maturities of three months or less.
1.11 Financial assets
Recognition and de-recognition
Financial assets are recognised in the statement of financial position when
the Group becomes party to the contractual provision of the instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS
15, all financial assets are initially measured at fair value adjusted for
transaction costs (where applicable). Financial assets, other than those
designated and effective as hedging instruments, are classified into the
following categories:
· Amortised cost;
· Fair value through profit or loss (FVTPL); and
· Fair value through other comprehensive income (FVOCI).
In the periods presented, the Group does not have any material financial
assets categorised as FVTPL or FVOCI. The classification is determined
by both:
· The entity's business model for managing the financial asset; and
· The contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in
profit or loss, where material, are presented within finance costs, finance
income or other financial items, except for impairment of trade receivables
which is presented within sales, general and administrative expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
· They are held within a business model whose objective is to hold
the financial assets and collect their contractual cash flows; and
· The contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group's trade and most other receivables (notes
20 and 21) and cash and cash equivalents (note 22) fall into this category of
financial instruments.
Impairment of financial assets
Under IFRS 9, the requirements are to use forward-looking information to
recognise expected credit losses - the 'expected credit loss (ECL) model'. The
Group considers a broad range of information when assessing credit risk and
measuring expected credit losses, including past events, current conditions,
and reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
1.12 Trade receivables
Trade receivables are amounts due from customers for licences sold or services
performed in the ordinary course of business. They are generally due for
settlement within 30 days of the invoice date and are therefore all classified
as current. Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method,
less provision for impairment. An impairment loss is recognised when there is
objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivable.
The Group has applied the simplified approach to measuring expected credit
losses, which uses a lifetime expected loss allowance. To measure the
expected credit losses, trade receivables have been grouped based on days
overdue. The expected impairment loss is recognised in the consolidated
statement of profit or loss and comprehensive income within sales, general and
administrative expenses, and subsequent recoveries are credited to the same
account previously used to recognise the impairment charge. During the current
and prior period, the result of the above was immaterial and no impairment
loss has been recognised.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of receivable mentioned above. The credit qualities of
these receivables are periodically assessed by reference to external credit
ratings (if available) or to historical information about their default rates.
The Group does not hold any collateral as security.
As the total carrying amount of the current portion of the trade and other
receivables is due within the next 12 months after the reporting date, the
impact of applying the effective interest method is not significant and,
therefore, the carrying amount equals the contractual amount or the fair
value initially recognised.
1.13 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the item. Depreciation on assets is
calculated using the straight-line method to allocate their cost over their
estimated useful lives, as follows:
· Fixtures and fittings: 3-10 years
· IT equipment: 2-5 years
The assets' residual values and useful lives are reviewed and adjusted if
necessary at each reporting date. An asset's carrying amount is written down
immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount. Repairs and maintenance are
charged to the consolidated statement of profit or loss and comprehensive
income as incurred. Any gains or losses on disposals are recognised within
sales, general and administrative expenses in the consolidated statement of
profit or loss and comprehensive income unless otherwise specified.
Property, plant and equipment are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount, which is the higher of
an asset's fair value less costs to sell and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows.
1.14 Goodwill and other intangible assets
Goodwill
Goodwill arose on the acquisition of subsidiaries in 2012 as part of a group
reorganisation and represents the excess of the consideration transferred over
the fair value of the identifiable assets acquired and the liabilities and
contingent liabilities assumed.
The Group assesses whether goodwill has suffered any impairment on an annual
basis in accordance with the accounting policy stated in note 1.9 above.
There is one CGU, being the Group, as its geographical operations do not have
separate or distinct cash inflows. The recoverable amount of goodwill has been
determined based on value-in-use calculations using cash flow projections
from financial budgets and forecasts.
Budgeted cash flow projections are based on the expectation of signing new
customers in the Group's sales pipeline as well as ongoing projects with
existing customers. Budgeted gross margin is based on historical evidence and
the expectations of market development and efficiency leverage. Management
believes that any reasonable change in any of the key assumptions on
which the recoverable amount is based would not cause the reported carrying
amount to exceed the recoverable amount of the CGU. The discount rate used
reflects the Group's pre-tax weighted average cost of capital (WACC), as
adjusted for region-specific risks and other factors as required by IFRS.
Intangible assets
Internally generated product development costs only qualify for capitalisation
if the Group can demonstrate all of the following:
· The technical feasibility of completing the intangible asset so
that it will be available for use or sale, its intention to complete the
intangible asset and use or sell it;
· Its ability to use or sell the intangible asset, including how
the intangible asset will generate probable future economic benefits;
· The existence of a market or, if it is to be used internally, the
usefulness of the intangible asset;
· The availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
· Its ability to measure reliably the expenditure attributable to
the intangible asset during development.
Commercial viability of new products, modules or capabilities is generally not
proven until the major high-risk development issues have been resolved
through testing of the specific development. Development expenditure incurred
on minor or major upgrades, or other changes in software functionality, does
not satisfy the criteria, where it is considered that the product is not
substantially new in its design or functional characteristics. Such
expenditure is therefore recognised as an expense. See note 15 for disclosure
of development costs which have met the criteria of IAS 38 for recognition.
The Group continually assesses the eligibility of development costs for
capitalisation on a project-by-project basis.
Externally acquired intangible assets are initially recorded at historical
cost. Historical cost includes expenditure that is directly attributable to
the acquisition of the item.
The Group amortises intangible assets with a limited useful life, using the
straight-line method over the following periods:
· Computer software: licence period or 10 years as applicable
· Internally generated software: 3-5 years
Amortisation is presented within sales, general and administrative expenses.
Research and development costs which do not meet the criteria set out above
are recognised as an expense when incurred. Development costs previously
recognised as an expense are not recognised as an asset in subsequent periods.
1.15 Trade and other payables
Trade payables are obligations to pay for goods or services which have been
acquired in the ordinary course of business from suppliers. Trade payables are
recognised initially at fair value and subsequently measured at amortised
costs using the effective interest rate method. As the total carrying amount
is due within the next 12 months from the reporting date, the impact of
applying the effective interest method is not significant and, therefore, the
carrying amount equals the contractual amount or the fair value initially
recognised.
The Group's financial liabilities include trade and other payables and lease
liabilities. Financial liabilities are initially measured at fair value,
and, where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method. All interest-related charges and, if applicable,
changes in an instrument's fair value that are reported in profit or loss are
included within finance costs or finance income. The Group derecognises
financial liabilities when, and only when, the Group's obligations are
discharged, cancelled or expired.
Trade and other payables and lease liabilities are classified as current
liabilities if payment is due within one year or less. If not, they are
presented as non-current liabilities.
1.16 Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is more likely than not that an
outflow of resources will be required to settle the obligation and a reliable
estimate of the amount can be made. When the effect of the discounting is
material, provisions are measured at the present value of the expenditures
expected to be required to settle the obligation.
1.17 Employee benefits
The Group provides a range of benefits to employees, including paid holiday
arrangements and defined contribution pension plans.
Short-term benefits
Short-term benefits, including health cover and other similar non-monetary
benefits, are recognised as an expense in the period in which the service is
received.
Post-employment benefits
The Group operates various defined contribution plans for its employees. A
defined contribution plan is a pension plan where the Group pays fixed
contributions into a separate independent entity. The Group has no legal or
constructive obligation to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to the employee's
service in the current and prior periods.
Employee share scheme expense
The Group makes equity-settled share-based payments to certain employees,
which are measured at fair value at the date of grant and expensed on
a straight-line basis over the vesting period, based on the Group's estimate
of shares that will eventually vest. For those share schemes with
market-related vesting conditions, the fair value is determined using the
Monte Carlo model at the grant date. For share options issued with EPS
(non-market) performance vesting conditions, the fair value of the underlying
vehicle is equal to the grant date share price discounted by the expected
dividend yield to reflect the lack of dividend accrual over the vesting
period. For all other share awards, those with pure employment conditions
attached, the fair value is determined by reference to the market value of the
shares at the grant date or (where they have an exercise price) by using the
Black Scholes model. For all share schemes with non-market vesting conditions,
the likelihood of vesting has been taken into account when determining the
relevant charge. Vesting assumptions are reviewed during each reporting period
to ensure they reflect current expectations.
1.18 Equity
Ordinary shares
Ordinary shares are classified as equity. There are no restrictions on the
distribution of capital and the repayment of capital.
Cumulative translation reserve
Exchange differences arising on translation of foreign subsidiaries are
recognised in other comprehensive income and accumulated in a separate
reserve within equity. The cumulative amount would be reclassified to profit
or loss if the entity was disposed of.
Own shares
Own shares represent the shares of the parent company Alfa Financial Software
Holdings PLC that are either held by the employee benefit trust, or acquired
by the Group as part of its share buy-back programme (see note 28).
Own shares are recorded at cost and deducted from equity.
1.19 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of Alfa by the weighted average number of ordinary shares
outstanding during the year (excluding own shares held).
Diluted earnings per share
Diluted earnings per share is calculated in line with the basic earnings per
share calculation above except that the weighted average number of shares
includes all potentially dilutive options granted by the reporting date as if
those options had been exercised on the first day of the accounting period or
the date of the grant, if later. The shares have no right to voting or to
dividends while held in trust.
2. Critical accounting judgements, estimates and assumptions
The preparation of financial statements requires the use of accounting
estimates which, by definition, will seldom equal the actual results.
Management also needs to exercise judgement in applying the Group's accounting
policies.
This note provides an overview of the areas that involved a higher degree of
judgement or complexity, and of items which are more likely to be materially
adjusted in future periods due to estimates and assumptions turning out to be
wrong. Detailed information about each of these estimates and judgements is
included in other notes, together with information about the basis of
calculation for each affected line item in the financial statements.
2.1 Critical judgements in applying the Group's accounting
policies
Revenue recognition - Assessing performance obligations
The Group is required to make an assessment as to whether the implementation
process, which includes customised licence and implementation revenue streams
as well as any maintenance fees during this phase, forms one or a number of
performance obligations. Since the residual value method is used for the
customised licence revenue (as explained in note 1.5), the estimation of fair
value of implementation revenue will impact the contract consideration
assigned to the customised licence.
In addition, the Group is also required to make an assessment as to whether
each contract contains an expectation to deliver multiple separate instances
of the customised licence which may form separate groups of distinct
performance obligations. In doing the above, the Group assesses each software
implementation contract as to whether the underlying software requires
significant modification or customisation by the Group in order to meet the
customer's requirements before Alfa Systems can be utilised by the customer.
Therefore, judgement is required in determining which efforts relate to the
implementation process and which efforts could be determined to be
development services which change or enhance the underlying code. In making
this judgement, the Group assesses the contractual terms and the original
project plan for the implementation but also uses historical evidence of what
constitutes core implementation work.
Internally generated software development - Assessing whether a project meets
criteria of IAS 38
The Group is required to make an assessment of each ongoing project in order
to determine at what stage (if at all) a project meets the criteria outlined
in the Group's accounting policies. Such assessment may, in certain
circumstances, require significant judgement. In making this judgement, the
Group evaluates, amongst other factors, the stage at which technical
feasibility has been achieved, management's intention to complete and use or
sell the product, the likelihood of success, the availability of technical and
financial resources to complete the development phase and management's ability
to measure reliably the expenditure attributable to the project. Research and
product development expenditure incurred on minor or major upgrades, or other
changes in software functionality, does not satisfy the criteria where it is
considered that the product is not substantially new in its design or
functional characteristics. Such expenditure is therefore recognised as an
expense.
2.2 Key sources of estimation uncertainty
Revenue recognition - Estimates feeding through to the customised licence
The customised licence and its associated material right are both impacted by
the following estimates:
· Assigning a stand-alone selling price for implementation services
day rates: the Group assesses the value of the implementation services
delivered by assessing the effective day rate for an implementation contract,
taking into account all revenue streams from implementation contracts against
day rates of similar projects in the same geographies;
· Estimating the appropriate life of customer relationship: the
Group calculates the material right deferral of the customised licence based
on the total customer relationship life. This is also the time over which the
material right will be spread; and
· Determining the split of maintenance amount between support
efforts and right to use: the Group must estimate what percentage of the total
maintenance fee relates to the customised licence.
A change to the stand-alone selling price for implementation services to the
effective day rate, or an increase in expected customer life by a year, or a
10% variance in the split of maintenance amount between support efforts and
right to use, results in an impact on revenue for the year of up to an
increase/decrease of £0.1m.
3. Financial risk management
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
Area Exposure arising from Measurement Management
Market risk - foreign exchange Contracted revenue and costs denominated in a currency other than the Cash flow forecasting and foreign exchange sensitivity Natural hedging from localised cost base and conversion of foreign currency
entity's functional currency; and Monetary assets and cash balances into pounds sterling Use of forward contracts to manage some
liabilities denominated in a currency other than the entity's functional of the foreign exchange risk (these are not hedge accounted)
currency.
Credit risk - cash balances Cash and cash equivalents Credit ratings Diversification of bank deposits
Credit risk - customer receivables Trade receivables and accrued income Ageing analysis Credit ratings Credit checks and contractual payment terms
Liquidity Cash and cash equivalents Daily cash reporting Cash forecasting and managing maturity of cash deposits
The Group's overall risk management policy focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the
Group's financial performance. The Group has used financial instruments to
hedge certain risk exposures in the past. Risk management is carried out by
the finance function under policies approved by the Board. The finance
function identifies, evaluates and mitigates financial risks when deemed
necessary.
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, so that it can provide returns for
shareholders and benefits for other stakeholders, and maintain an optimal
capital structure.
3.1 Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risks
arising from various currencies, primarily with respect to those described
below. Revenue is predominantly denominated in pounds sterling and US dollars.
Operating costs are influenced by the currencies of the countries where the
Group's subsidiaries are based, and pounds sterling and the US dollar are the
currencies in which most operating costs are denominated.
The split by currency in relation to trade receivables is set out in note 20.
The Group's exposure to foreign currency risk in relation to revenue is set
out in note 5.4.
The Group utilised forward contracts in both 2023 and 2022 to hedge against
foreign currency exposure. The Group has one outstanding commercial foreign
exchange contract at 31 December 2023 with a fair value of £0.2m (2022: none
outstanding). No hedge accounting has been applied in the year.
A 10% increase in the USD:GBP exchange rate in the year ended 31 December 2023
would have increased revenue and profit by 3% and 6% respectively (2022: 4%
and 8% respectively). Management believes that 10% is a reasonable sensitivity
given historical exchange rate movement.
3.2 Credit risk
a. Credit risk related to transactions with financial
institutions
Credit risk with financial institutions is managed by the Group's finance
function in accordance with a Board-approved treasury policy. Management is
not aware of any significant risks associated with financial institutions as a
result of cash and cash equivalents deposits (including short-term
investments) and financial derivative transactions.
b. Credit risks related to customer trade receivables
Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation, change of strategy and
default or delinquency in payments are considered indicators that a trade
receivable could be impaired. Given the complexity, the size and the length of
certain software implementation of related projects, a delay in the settlement
of an open trade receivable does not necessarily constitute objective
evidence that the trade receivable is irrecoverable.
The Group's customer base predominantly consists of large financial
institutions that are financially sound. The responsibility for customer
credit risk management rests with management of the Group. Payment terms are
set in accordance with practices in the different geographies and end-markets
served, typically being 30 days from the date of the invoice. Trade
receivables are actively monitored and managed. Collection risk is mitigated
through prompt submission of invoices. Historically, there has been a de
minimis level of customer default as a result of the long history of dealing
with the Group's customer base and an active credit monitoring function.
Where applicable, credit limits may be established based on internal or
external rating criteria, which take into account such factors as the
financial condition of the customers, their credit history and the risk
associated with their industry segment.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses, which uses a lifetime expected loss allowance for all trade
receivables and accrued income. To measure the expected credit losses, trade
receivables and accrued income have been grouped based on shared credit risk
characteristics and the days past due. The accrued income relates to unbilled
work in progress and has substantially the same risk characteristics as the
trade receivables for the same types of contracts, other than where the Group
has collected upfront payments in the form of licence fees at the start of a
software implementation contract.
The expected loss rates of trade receivables are based on the payment profiles
of customer invoices over a period of 36 months before 31 December 2023
(2022: 31 December 2022), and the corresponding historical credit losses
experienced within this period. The historical loss rates are then adjusted
to reflect current or forward-looking information in relation to any
macroeconomic factors affecting the ability of the customers to settle the
receivables. The same approach is applied to both trade receivables and
accrued income expected credit loss provisions.
The Group has not identified any current factors or forward-looking
information which would be relevant to the historical loss rates. Therefore,
on this basis, the loss allowance as at 31 December 2023 and 31 December 2022
was immaterial for both trade receivables and accrued income.
See note 20 - Trade receivables for the ageing of trade receivables and
significant customer credit risk exposure.
3.3 Liquidity risk
The Group's principal objectives when managing capital are to ensure that
funds are available to support its growth strategy and to safeguard the
Group's ability to continue as a going concern.
The capital structure of the Group consists of cash and cash equivalents (note
22) and equity attributable to equity holders of the parent.
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The Group manages its exposure to liquidity risk through short and long-term
forecasts and by seeking to align the maturity profiles of its financial
assets with its financial liabilities. The Group's policy is to maintain an
adequate level of liquidity to meet its liabilities expected to be settled in
the short or near term, under both normal and stressed conditions.
The following table details the remaining contractual maturity of the Group's
financial liabilities. The amounts disclosed in the table are the contractual
undiscounted cash flows.
31 December 2023
£m Total Less than Between Between Between More than
6 months
6 to 12 months
1 to 2 years
2 to 5 years
5 years
Trade and other payables 8.0 8.0 - - - -
Lease liabilities - future lease payments 9.3 0.8 0.9 1.6 4.6 1.4
31 December 2022
£m Total Less than Between Between Between More than
6 months
6 to 12 months
1 to 2 years
2 to 5 years
5 years
Trade and other payables 7.6 7.6 - - - -
Lease liabilities - future lease payments 10.9 0.9 0.9 1.7 4.6 2.8
4. Segments and principal activities
4.1 Revenue by stream
The Group assesses revenue by type of activity, being Subscription, Software
and Services, as summarised below:
£m 2023 2022
Subscription 31.8 27.4
Software 15.6 16.3
Services 54.6 49.6
Total revenue 102.0 93.3
4.2 Non-current assets geographical
information
Non-current assets attributable to each geographical market:
£m 2023 2022
UK 35.7 34.4
USA 1.0 1.2
Rest of World 0.1 0.3
Total non-current assets 36.8 35.9
Revenue by geographical market is contained within note 5.3. The table above
excludes deferred tax assets for both 2023 and 2022.
5. Revenue from contracts with customers
5.1 Customer concentration
There were no customers with revenue accounting for more than 10% of total
revenue in the current year. In the prior year, one customer had revenue
accounting for 11% of total revenue.
5.2 Timing of revenue
The Group derives revenue from the transfer of goods and services as follows
over time and at a point in time in the following revenue segments:
2023 Subscription Software Services Total
£m
revenue
At a point in time - time and materials - 9.8 39.3 49.1
At a point in time - fixed price - 0.5 - 0.5
Over time - time and materials - 3.5 15.3 18.8
Over time - fixed price 31.8 1.8 - 33.6
Total revenue 31.8 15.6 54.6 102.0
2022 Subscription Software Services Total
£m
revenue
At a point in time - time and materials - 8.9 33.1 42.0
At a point in time - fixed price - 0.4 0.4 0.8
Over time - time and materials - 6.1 16.1 22.2
Over time - fixed price 27.4 0.9 - 28.3
Total revenue 27.4 16.3 49.6 93.3
All goods and services are sold directly to customers.
5.3 Revenue geographical information
Revenue attributable to each geographical market based on where the customer
mainly utilises its instance of Alfa, or where the service is rendered, is as
follows:
£m 2023 2022
UK 38.1 31.0
USA 33.6 33.6
Rest of EMEA (excl. UK) 23.1 21.3
Rest of World 7.2 7.4
Total revenue 102.0 93.3
5.4 Revenue by currency
Revenue by contractual currency is as follows:
£m 2023 2022
GBP 46.3 39.0
USD 34.6 34.3
Euro 13.9 12.6
Other 7.2 7.4
Total revenue 102.0 93.3
5.5 Liabilities from contracts with customers
£m 2023 2022
Contract liabilities - deferred licence and fees 8.0 8.6
Contract liabilities - deferred maintenance 6.2 6.2
Total contract liabilities 14.2 14.8
Contract liabilities - deferred licence
Where a customer purchases a perpetual software licence, this is generally
invoiced upfront at the commencement of the implementation project. Customers
generally require additional development efforts over the life of the
implementation project in order to customise the underlying code within Alfa
Systems. Together, these two elements form the Group's customised licence
performance obligation. The fair value of this performance obligation is
determined using the residual method as set out in note 1.5.2 and this fair
value is recognised as the development effort is expended, on a
percentage-of-completion basis.
As such, the deferred licence contract liability balance as at 31 December
2023 and 31 December 2022 represents any amounts received in advance for the
customised licence performance obligation being satisfied (including any
unrecognised software licence amounts that were received upfront).
Additionally, where an option over the right to use Alfa Systems in the future
exists, the value of this is also included within the deferred licence
contract liability. The contract liability relating to the material right
value is increased over the life of the implementation project in line with
the percentage of completion of the development efforts and then released on a
straight-line basis over the expected remaining customer life post completion
of the implementation project.
The deferred licence contract liability balance will increase during the year
as a result of:
· Any new upfront software licence payments;
· Any write back in previously recognised revenue as a result of
project extensions or re-plans;
· Decreasing percentage of completion of development efforts; and
· Any additional material right balances that are added during the
year.
The deferred licence contract liability balance will decrease during the year
as a result of:
· Increasing percentage of completion of development efforts; and
· Any release of material right balances following the completion
of the implementation project.
Contract liabilities - deferred maintenance
The majority of the Group's customers are invoiced annually in advance for the
maintenance and support service provided by the Group. As such, the deferred
maintenance contract liability balance will increase as a result of billing
and invoices becoming due, and will decrease as the Group satisfies its
associated performance obligations. The deferred maintenance contract
liability balance as at 31 December 2023 and 31 December 2022 therefore
represents the Group's unsatisfied period maintenance performance obligation
for which the revenue has been invoiced in advance.
5.6 Unsatisfied performance obligations
During 2020, the Group entered into a new one-off five-year contract with a
customer to renew its software licence and maintenance agreements. The total
amount of the contract price from this non-cancellable contract that relates
to the performance obligations that are unsatisfied at 31 December 2023 is
£4.0m (2022: £6.2m). We expect to recognise £2.2m in the next financial
year and then the remaining £1.8m in the final financial year of the
contract, being 2025.
In addition, the Group has unsatisfied or partially satisfied performance
obligations at 31 December 2023 that relate to the licence customisation for
those customers that have ongoing implementation projects. This performance
obligation includes the delivery of the related software licence and any
development efforts which will change the underlying code. Linked to certain
of these ongoing and future projects, and also to certain implementation
projects completed during 2023, the Group also has unsatisfied or partially
satisfied performance obligations at 31 December 2023 that relate to the
option over the right to use Alfa Systems, and in particular any material
right in respect of discounts to be received by customers in future periods.
The above includes certain amounts recognised as contract liabilities. The
transaction price allocated to these unsatisfied or partially satisfied
performance obligations as at 31 December 2023 is £9.4m (2022: £11.0m). This
amount is expected to be recognised over the remaining life of the
implementation projects, in respect of the licence and development efforts,
and over the expected customer life (following the completion of the
implementation project) in respect of the option over the right to use Alfa
Systems. Of the £9.4m, it is expected that £2.0m will be recognised in 2024,
with the remainder being recognised in subsequent years.
These unsatisfied or partially satisfied performance obligations are based on
management's best judgement and may be impacted in the future by a number of
factors including:
· Any possible contract modifications;
· Currency fluctuations;
· External market factors; and
· Changes to the overall forecast project plan including the
overall life of the implementation project and any required
development efforts.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does
not disclose information about the unsatisfied performance obligations that
have original expected durations of one year or less. This includes those
performance obligations linked to ongoing services for all project types
(i.e. subscription, software and services).
The Group also applies the practical expedient in paragraph B16 of IFRS 15 and
does not disclose the amount of the transaction price allocated to the
unsatisfied contract performance obligations where consideration will be
received directly corresponding to the value of the performance obligation in
the future and this consideration aligns to the value received to date for the
corresponding performance obligation. This includes those performance
obligations linked to our software implementation services.
The disclosures above for unsatisfied or partially satisfied performance
obligations are not relevant to our subscription performance obligations as
these are typically satisfied on a monthly basis in line with the termination
rights of the customers (see note 1.5.6).
The Group has variable consideration in the form of contract banding for its
licence and maintenance volumes. It is included it in the transaction price
only to the extent that it is highly probable that a significant reversal of
revenue will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
6. Operating profit
The following items have been included in arriving at operating profit in the
table below:
£m 2023 2022
Research and development costs 3.1 2.2
Depreciation of property, plant and equipment 0.6 0.5
Depreciation of right-of-use lease assets 1.2 1.7
Amortisation of intangible assets 0.7 0.8
Foreign exchange loss / (gain) 0.1 (1.1)
Forward foreign exchange contracts (gain) (0.4) -
Share-based payments (including social security contributions) 1.6 1.8
RDEC tax credit* (0.5) -
Costs related to possible offers ** 0.6 -
*The RDEC tax credit of £0.5m has been presented within 'Other Income'. See
note 1.7.
**Costs related to possible offers of £0.6m were incurred in 2023 (2022:
nil). These related to legal fees and expenses incurred as a result of two
possible offers from private equity firms.
7. Personnel-related costs
£m 2023 2022
Wages and salaries 38.5 34.8
Social security contributions (on wages and salaries) 5.1 4.4
Pension costs 3.2 2.6
Profit share pay* 3.8 3.5
Share-based payments** 1.6 1.8
Total employment costs 52.2 47.1
*Profit share pay refers to a pool of money (that equates to approximately 10%
of the Group's pre-tax profits) which is shared amongst the
employees, excluding Directors and some other senior managers, as a
percentage of basic salary. The amount disclosed includes the related
social security contributions.
**This includes the related social security contributions.
Average monthly number of people employed based on location of home office 2023 2022
(including Executive Directors)
UK 334 307
USA 86 75
Rest of World 43 38
Total average monthly number of people employed 463 420
At 31 December 2023, the Group had 475 employees (2022: 441).
8. Key management
Key management compensation (including Directors):
£m 2023 2022
Wages, salaries and short-term benefits 2.1 2.7
Social security contributions 0.2 0.3
Post-employment benefits - 0.1
Share-based payments* 1.0 1.1
Total key management compensation 3.3 4.2
*This includes the related social security contributions.
Key management personnel consist of the Company Leadership Team and the
Executive and Non-Executive Directors. Directors' remuneration is detailed in
the Remuneration Report.
9. Auditor's remuneration
The Group obtained the following services from the Group's auditor as detailed
below:
£m 2023 2022
Audit fees
RSM UK Audit LLP
Audit of the consolidated financial statements 0.2 0.2
Audit of subsidiaries 0.2 0.2
Total audit fees 0.4 0.4
Audit-related assurance fees
Review of interim financial report 0.1 0.1
Total audit-related assurance fees 0.1 0.1
Non-audit services - -
Total audit and non-audit-related services 0.5 0.5
10. Finance income and expense
£m 2023 2022
Finance income
Interest income on cash or short-term bank deposits 0.3 -
£m Note 2023 2022
Finance expense
Interest on lease liabilities 24 (0.4) (0.6)
Other interest expense (0.1) -
Total finance expense (0.5) (0.6)
11. Income tax expense
Analysis of charge for the year
£m 2023 2022
Current tax:
Current tax on profit for the year 6.1 5.2
Adjustment in respect of prior years (1.2) (1.4)
Foreign tax on profit of subsidiaries for the current year 0.5 0.3
Current tax 5.4 4.1
Deferred tax:
Origination and reversal of temporary differences 0.7 0.2
Adjustment in respect of prior years - 0.1
Deferred tax 0.7 0.3
Total tax charge in the year 6.1 4.4
The effective tax rate for the year is lower (2022: lower) than the standard
rate of corporation tax in the UK. The effective tax rate for the year ended
31 December 2023 was 20.6% (2022: 15.2%). The effective tax rate for the year
is impacted by favourable adjustments in respect to prior years totalling
£1.2m (2022: £1.3m), due predominately to the benefit of the R&D claim
for 2022 (2022: due to the benefit of the R&D claim for 2021 of £0.9m
and favourable adjustments in respect to prior year provisions of £0.4m). As
the Group is now required to claim relief for R&D under the UK RDEC
regime, no tax rate benefit will be expected in the future (the tax benefit is
instead reflected in lower cash tax payable) and, as a consequence, the
effective tax rate will trend towards the UK statutory tax rate.
The overall tax charge for the year is reconciled as follows:
Analysis of charge for the year
£m 2023 2022
Profit on ordinary activities before taxation 29.6 28.9
Profit on ordinary activities at the standard rate of corporation tax - 23.5% 7.0 5.5
(2022: 19.0%)
Tax effects of:
Effect of different tax rates of subsidiaries operating in other jurisdictions - 0.1
Adjustment in respect of prior years (1.2) (1.3)
Impact of disallowable items 0.2 -
Other 0.1 0.1
Total tax charge for the year 6.1 4.4
The rate of UK corporation tax increased from 19% to 25% with effect from
April 2023. The blended rate of UK corporation tax for 2023 is therefore
23.5%.
12. Earnings per share
2023 2022
Profit attributable to equity holders of Alfa (£m) 23.5 24.5
Weighted average number of shares outstanding during the year 294,462,166 296,309,874
Basic earnings per share (pence per share) 7.99 8.24
Weighted average number of shares outstanding including potentially dilutive 298,119,816 302,038,789
shares
Diluted earnings per share (pence per share) 7.90 8.09
The weighted average number of ordinary shares in issue excludes 5,537,834
(2022: 3,690,126) shares, being the weighted average number of shares held by
the Group under the employee benefit trust, and in Treasury as a result of the
share buy-back programme (that completed in June 2023). The weighted average
diluted number of ordinary shares outstanding, including share awards, uses an
average of 3,657,650 (2022: 5,728,914) dilutive ordinary shares.
13. Financial assets and liabilities
£m Note 2023 2022
Financial assets
Financial assets at amortised cost:
Trade receivables 20 5.6 8.9
Other financial assets at amortised cost 21 4.9 6.7
Cash and cash equivalents 22 21.8 18.7
Total financial assets 32.3 34.3
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 23 8.0 7.6
Lease liabilities 24 8.2 9.3
Total financial liabilities 16.2 16.9
14. Goodwill
£m 2023 2022
Cost
At 1 January 24.7 24.7
At 31 December 24.7 24.7
The recoverable amount of goodwill has been determined based on value-in-use
calculations using cash flow projections from financial budgets and forecasts
for a five-year period using a pre-tax discount rate of 10.4% (2022: 12.2%)
which is based on the CGU's weighted average cost of capital. Cash flows
beyond these periods have been extrapolated using a steady 2.7% (2022: 2.5%)
average growth rate which is reflective of management's best estimate at the
time. Management believes that any reasonable change in any of the key
assumptions on which the recoverable amount is based would not cause the
reported carrying amount to exceed the recoverable amount of the CGU.
15. Other intangible assets
£m Computer software Internally Total
generated
software
Cost
At 1 January 2022 1.6 3.1 4.7
Additions 0.1 1.5 1.6
Disposals - (0.3) (0.3)
At 31 December 2022 1.7 4.3 6.0
Amortisation
At 1 January 2022 0.9 1.4 2.3
Charge for the period 0.1 0.7 0.8
Disposals - - -
At 31 December 2022 1.0 2.1 3.1
Net book value
At 31 December 2022 0.7 2.2 2.9
Cost
At 1 January 2023 1.7 4.3 6.0
Additions - 2.8 2.8
At 31 December 2023 1.7 7.1 8.8
Amortisation
At 1 January 2023 1.0 2.1 3.1
Charge for the period 0.1 0.6 0.7
At 31 December 2023 1.1 2.7 3.8
Net book value
At 31 December 2023 0.6 4.4 5.0
Significant movement in other intangible assets
During 2023, Alfa developed new internally generated software at a cost of
£2.8m (2022: £1.5m). This software will be amortised over three to five
years.
The total research and product development expense for the period was £3.1m
(2022: £2.2m).
16. 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 year 0.2 0.3 0.5
Disposals (0.1) - (0.1)
At 31 December 2022 0.9 3.4 4.3
Net book value
At 31 December 2022 0.6 0.4 1.0
Cost
At 1 January 2023 1.5 3.8 5.3
Additions 0.1 0.5 0.6
Disposals - (1.1) (1.1)
At 31 December 2023 1.6 3.2 4.8
Depreciation
At 1 January 2023 0.9 3.4 4.3
Charge for the year 0.2 0.4 0.6
Disposals - (1.1) (1.1)
At 31 December 2023 1.1 2.7 3.8
Net book value
At 31 December 2023 0.5 0.5 1.0
17. 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 year 0.1 1.6 1.7
Disposals - (2.6) (2.6)
At 31 December 2022 0.3 4.0 4.3
Net book value
At 31 December 2022 0.2 6.9 7.1
Cost
At 1 January 2023 0.5 10.9 11.4
Additions 0.2 - 0.2
At 31 December 2023 0.7 10.9 11.6
Depreciation
At 1 January 2023 0.3 4.0 4.3
Charge for the year 0.2 1.0 1.2
At 31 December 2023 0.5 5.0 5.5
Net book value
At 31 December 2023 0.2 5.9 6.1
The disposal in 2022 relates to the assignment of the lease to the 9th floor
of Moor Place, 1 Fore Street Avenue, London. Refer to note 32.3.
The Group recognised the following amounts in the consolidated statement of
profit or loss and comprehensive income in relation to leases under IFRS 16:
£m 2023 2022
Depreciation (1.2) (1.7)
Interest expense (0.4) (0.6)
Short-term lease expense (0.1) (0.2)
Sub-lease rentals
One of the leased properties was being sub-leased to tenants under operating
leases, with rentals payable quarterly. This sub-lease ended during 2022.
Minimum lease payments receivable on these sub-leases of property are as
follows:
£m 2023 2022
Within one year - -
Later than one year but not later than five years - -
Later than five years - -
Total sub-lease payments receivable - -
Income from sub-lease in the year - 0.5
18. Deferred income tax
The provision for deferred tax consists of the following deferred tax
assets/(liabilities) relating to accelerated capital allowances and short-term
timing differences in relation to accruals and share-based payments.
£m 2023 2022
Balance as at 1 January 1.6 1.8
Effect of changes in tax rates (0.1) -
Adjustments in respect of prior period - (0.1)
Deferred income taxes recognised in the consolidated statement of profit or (0.7) (0.2)
loss and comprehensive income
Deferred tax on share-based payments recognised in reserves (0.5) 0.1
Balance as at 31 December 0.3 1.6
Consisting of:
Depreciation in excess of capital allowances (0.1) (0.1)
Other timing differences 0.4 1.7
Balance as at 31 December 0.3 1.6
Deferred income tax liabilities have not been recognised for the withholding
tax and other taxes that would be payable on the unremitted earnings of
certain subsidiaries as the Group is able to control the timing of these
temporary differences and it is probable that they will not reverse in the
foreseeable future. Unremitted earnings totalled £5.5m at 31 December 2023
(2022: £4.1m).
At the reporting date, the provision for deferred tax comprised net deferred
tax assets of £0.4m relating to overseas group companies, and net deferred
tax (liabilities) in respect to the UK of £(0.1m). In the prior year, the
provision for deferred tax comprised net deferred tax assets of £0.4m
relating to overseas group companies, and net deferred tax assets in respect
to the UK of £1.2m.
19. Interests in joint venture
At the beginning of May 2020, the Group formed Alfa iQ, a joint venture
established to greatly enhance Alfa's ability to develop artificial
intelligence solutions for the auto and equipment finance industry. The joint
venture was set up 51:49 between Alfa and Bitfount, a company founded by
Blaise Thomson. The financial and operating activities of the Group's joint
venture are jointly controlled by the participating shareholders. The
participating shareholders have rights to the net assets of the joint venture
through their equity shareholdings. The activity in Alfa iQ is being brought
fully into the Group. As a result, the Alfa iQ joint venture ceased its
activity in late 2023 and the structure is now in the process of being
formally dissolved. The investment in joint venture and the loan have
therefore been written off as at 31 December 2023. The interest in the joint
venture consists of part investment and part loan to the joint venture,
accounted for as set out in note 1.2.
Investment
£m 2023 2022
Carrying amount as at 1 January 0.1 0.2
Other movements 0.1 -
Share of net loss from the joint venture (0.2) (0.1)
Carrying amount as at 31 December - 0.1
Loan to joint venture
£m 2023 2022
Carrying amount as at 1 January 0.1 0.1
Loan write off (0.1) -
Carrying amount as at 31 December - 0.1
The loss from interest in joint ventures is £0.3m (2022: £0.1m) made up of
both Alfa's share of its loss for the year and also the write off of the loan
(as part of bringing in Alfa iQ's operations into Alfa). The total interest in
the joint venture is £nil (2022: £0.2m).
20. Trade receivables
£m 2023 2022
Trade receivables 5.6 8.9
Provision for impairment - -
Trade receivables - net 5.6 8.9
Ageing of trade receivables
Ageing of net trade receivables 2023 2022
£m
Within agreed terms 5.0 6.4
Past due 1-30 days 0.6 2.4
Past due 31-90 days - 0.1
Past due 91+ days - -
Trade receivables - net 5.6 8.9
The Group believes that the amounts that are past due are fully recoverable as
there are no indicators of future delinquency or potential litigation.
Currency of trade receivables
£m 2023 2022
GBP 2.6 4.5
USD 2.4 2.7
Other 0.6 1.7
Trade receivables - net 5.6 8.9
Trade receivables due from significant customers
There were no customers with revenue accounting for more than 10% of total
revenue in the current year. In the prior year, the one customer with revenue
accounting for more than 10% of total revenue had outstanding trade
receivables of £0.7m (all amounts have since been collected).
Impairment and risk exposure
Information about the impairment of trade receivables and the Group's exposure
to market risk (specifically foreign currency risk) and credit risk can be
found in note 3.
21. Other receivables held at amortised cost
£m 2023 2022
Accrued income 4.6 6.5
Prepayments 3.8 4.5
Corporation tax recoverable 1.9 0.2
Other receivables 0.3 0.2
Total other receivables held at amortised cost 10.6 11.4
Accrued income represents fees earned but not yet invoiced at the reporting
date which have no right of offset with contract liabilities - deferred
licence amounts. Faster invoicing at December 2023 reduced the accrued income
balance, which reduced by £1.9m compared with December 2022.
Prepayments include £1.3m (2022: £1.7m) of deferred costs in relation to
costs to fulfil contracts - see note 1.5. During the year, £0.2m (2022:
£0.3m) relating to costs to fulfil contracts has been recognised within cost
of sales.
Corporate tax recoverable at the reporting date of £1.9m (2022: £0.2m)
represents UK tax, pending the submission of R&D related claims for 2022
and 2023.
22. Cash and cash equivalents
£m 2023 2022
Cash at bank and in hand 21.8 18.7
Cash and cash equivalents 21.8 18.7
Currency of cash and cash equivalents
£m 2023 2022
GBP 13.5 10.0
USD 3.4 4.3
AUD 1.8 2.1
EUR 2.2 1.9
Other 0.9 0.4
Cash and cash equivalents 21.8 18.7
Cash and cash equivalents are all held with banks and other financial
instructions which must fulfil credit rating and investment criteria approved
by the Board.
23. Current and non-current liabilities
£m 2023 2022
Trade payables 0.5 0.8
Other payables 9.5 8.7
Contract liabilities - deferred licence and fees 8.0 8.6
Contract liabilities - deferred maintenance 6.2 6.2
Lease liabilities (note 24) 8.2 9.3
Provisions for other liabilities (note 25) 0.7 0.9
Total current and non-current liabilities 33.1 34.5
Less non-current portion (7.5) (8.9)
Total current liabilities 25.6 25.6
Other payables includes amounts relating to other tax and social security of
£2.0m (2022: £1.9m). Of the remainder, £5.4m (2022: £5.3m) relates to
amounts due as part of payroll.
24. Lease liabilities
The following table sets out the reconciliation of the lease liabilities from
1 January 2022 to the amount disclosed at 31 December 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 0.2
Disposals -
Interest charge 0.4
Payments made on lease liabilities (1.7)
At 31 December 2023 8.2
Additions to lease liabilities include extensions to existing lease
agreements. Total lease payments in 2023 were £1.8m (2022: £2.4m).
Below is the maturity analysis of the lease liabilities:
£m 2023 2022
Non-current 6.8 8.0
Current 1.4 1.3
Total lease liabilities 8.2 9.3
No later than one year 1.7 1.8
Between one year and five years 6.2 6.2
Later than five years 1.4 2.9
Total future lease payments 9.3 10.9
Total future interest payments (1.1) (1.6)
Total lease liabilities 8.2 9.3
The Group's net debt is made up of cash and cash equivalents and lease
liabilities. The movement during the year in lease liabilities is set out
above. Movements in cash and cash equivalents are set out in the cash flow
statement. These are the only changes in liabilities arising from financing
activities in the year.
25. Provision for other liabilities
£m
At 1 January 2022 1.4
Provided in the period 0.3
Utilised in the period (0.3)
Released in the period (0.5)
At 31 December 2022 0.9
Provided in the period 0.2
Utilised in the period (0.4)
Released in the period -
At 31 December 2023 0.7
Provisions for other liabilities comprise amounts for office dilapidations and
employer taxes on share-based payments. It is expected that these will be
utilised as follows: £0.3m in 2030 and £0.4m over various years.
26. Share capital
2023 2022
Issued and fully paid Shares £m Shares £m
Ordinary shares - 0.1 pence 300,000,000 0.3 300,000,000 0.3
Balance as at 31 December 300,000,000 0.3 300,000,000 0.3
No additional shares have been issued or cancelled in the year ended 31
December 2023.
27. Translation reserve
£m 2023 2022
At 1 January 0.4 -
Currency translation of subsidiaries (0.2) 0.4
At 31 December 0.2 0.4
28. Own shares
£m 2023 2022
Balance at 1 January 7.5 3.4
Acquired in the year 4.8 5.6
Distributed on exercise of options (3.6) (1.5)
Balance at 31 December 8.7 7.5
On 18 January 2022, the Group announced the launch of a share buy-back
programme which ended on 30 June 2023. Refer to the Company website for more
details.
The own shares reserve represents the cost of shares in Alfa Financial
Software Holdings PLC that have been:
· Purchased in the market and held by the Group's employee benefit
trust to satisfy options under the Group's share options plans. The number of
shares held as at 31 December 2023 was 721,036 (FY 2022: 2,163,952); and
· Purchased in the market and held by the Group as a result of the
share buyback programme that was launched on 18 January 2022. The number of
shares held at 31 December 2023 was 4,775,119 (FY 2022: 2,832,073).
Own shares distributed relates to shares distributed to employees from the
employee benefit trust for bonus awards under share schemes. As at 31 December
2023, the Group held 1.84% (2022: 1.67%) of its own called-up share capital.
29. Share awards
The Group recognised total expenses relating to share-based payment of £1.6m
(2022: £1.8m) in the current year. Of this, £1.3m (2022: £1.6m) relates to
equity-settled LTIP schemes and £0.3m (2022: £0.2m) relates to Employee
ShareSave schemes. See further detail below. The outstanding share schemes are
made up of the following:
Grant date Condition type Plan Vesting date Exercise Share options Share options
price
31 December
31 December 2022
2023
June 2020 Service and Performance LTIP June 2023 0p - 2,286,502
June 2020 Service Only LTIP June 2023 0p - 35,971
April 2021 Service and Performance LTIP April 2024 0p 1,070,668 1,070,668
November 2021 Service Only LTIP October 2024 0p 60,872 60,872
November 2021 Service Only UK Employee ShareSave January 2025 153.6p 172,832 397,228
November 2021 Service Only US Employee ShareSave January 2024 167.0p 40,323 70,515
April 2022 Service and Performance LTIP April 2025 0p 741,162 741,162
April 2022 Service Only LTIP April 2025 0p 237,965 237,965
April 2022 Service Only US Employee ShareSave June 2024 141.1p 27,727 36,731
May 2022 Service Only UK Employee ShareSave June 2025 132.8p 214,383 530,320
September 2022 Service Only LTIP September 2025 0p 5,917 5,917
April 2023 Service and Performance LTIP April 2026 0p 913,963 -
April 2023 Service Only LTIP April 2026 0p 383,814 -
April 2023 Service Only UK Employee ShareSave June 2026 109.6p 857,493 -
April 2023 Service Only US Employee ShareSave June 2025 116.5p 54,960 -
The weighted average share price at the date of exercise for share options
exercised during the period was 161.7 pence (2022: 150.0 pence). The options
outstanding at 31 December 2023 had a weighted average exercise price of 34.7
pence (2022: 27.1 pence), and a weighted average remaining contractual life of
1.5 years (2022: 1.2 years).
The opening weighted average exercise price at 1 January 2023 was 27.1 pence
(1 January 2022: 24.1 pence). The weighted average exercise price of options
forfeited and exercised during the year was 161.2 pence (31 December 2022:
128.5 pence). The expected price volatility is based on the historical
volatility adjusted for any expected changes to future volatility due to
publicly available information. The weighted average exercise price of options
granted in the period was 45.4 pence (2022: 48.7 pence).
The total share-based payment charge relating to Alfa Financial Software
Holdings PLC shares for the year is split as follows:
£m 2023 2022
Employee share schemes - value of services 1.5 1.5
Expense in relation to fair value of social security liability on employee 0.1 0.3
share schemes
Total cost of employee share schemes 1.6 1.8
Details of the share options outstanding during the year are as follows:
2023 2022
Outstanding at 1 January 5,473,851 5,470,741
Conditionally awarded in year 2,210,230 1,552,095
Exercised (2,322,473) (1,032,382)
Forfeited or expired in year (579,529) (516,603)
Outstanding at 31 December 4,782,079 5,473,851
Exercisable at the end of the year - -
29.1 LTIPs
The June 2020 LTIP awards vested during the year. The exercise of these awards
had a net impact of £1.7m on own shares and £3.4m on retained earnings.
The 2021 April LTIP awards and the 2022 April LTIP awards (service and
performance conditions) are conditional on performance conditions, 50% based
on EPS performance (non-market condition) and 50% on TSR (market condition) as
well as a three-year employment fulfilment. The fair value of these awards
has been determined using the Monte Carlo model.
The 2021 November LTIP awards, the 2022 April LTIP awards and the 2022
September LTIP awards (service conditions) are conditional on employment only.
The fair value of these awards is equal to the closing share price on the
date of grant, discounted by the expected 12-month dividend yield to reflect
the lack of dividend accrual over the vesting period. The expected price
volatility is based on the historical volatility (based on the remaining life
of the scheme), adjusted for any expected changes to future volatility due to
publicly available information.
The 2023 April LTIP awards (service and performance conditions plan) are
granted conditional on performance conditions, 50% based on EPS performance
(non-market condition) and 50% on TSR (market condition) as well as a three
year employment fulfilment. For those awards with market-related vesting
conditions, the fair value has been determined using the Black Scholes model
at the grant date. For awards issued with EPS (non-market) performance vesting
conditions, the fair value of the underlying option is equal to the grant date
share price. The following table lists the inputs to the model used for the
awards granted in the year ended 31 December 2023 based on information at the
date of grant:
LTIP awards (granted in April) TSR element EPS element
Share price at date of grant 139.0p 139.0p
Award price 0p 0p
Volatility 47.0% 0.0%
Embedded TSR 10.3% -
Average correlation 19.8% -
Life of award 3 years 3 years
Risk-free rate 3.43% -
Fair value per award 68.1p 124.1p
In April 2023, the Group awarded to certain employees an LTIP conditional on
employment only. The fair value of these awards on the date of grant is
124.1p, discounted by the expected 12-month dividend yield to reflect the lack
of dividend accrual over the vesting period (three years).
All of these Company schemes, as well as any non-cyclical awards, are
equity-settled by award of ordinary shares.
29.2 Employee ShareSave Scheme
The Group has in place an Employee ShareSave Scheme - the Save As You Earn
(SAYE) scheme in the UK and Employee Stock Purchase Plan (ESPP) scheme in the
USA. Under these schemes, eligible employees can save up to a set limit each
month. At the end of the savings period (three years for SAYE and two years
for ESPP), employees can choose whether or not they wish to buy the shares at
the option price or take back their savings as cash. The option price is the
share price at the start of the plan with a 20% discount for the UK scheme and
15% discount for the US scheme. The fair value of these awards has been
determined using the Black Scholes model at the grant date.
31 December 2023
SAYE ESPP
Number of share options Exercise Number of share options Exercise
price price
Outstanding at beginning of year 927,548 145.0p 107,246 158.0p
Conditionally awarded in year 857,493 109.6p 54,960 116.5p
Forfeited or expired in year (75,699) 145.0p (21,436) 156.1p
Replaced in year (i.e. left an earlier plan to join the new plan) (464,634) 140.9p (17,760) 167.0p
Outstanding at the end of the year* 1,244,708 119.7p 123,010 138.6p
Exercisable at the end of the year - - - -
* The exercise price is a weighted average.
The inputs used in the calculation of the fair value of options granted in the
year were as follows:
SAYE ESPP
31 December
31 December
2023
2023
Share price 142.0p 136.5p
Exercise price 109.6p 116.5p
Expected volatility 52.40% 45.30%
Expected life 36 months 24 months
Risk-free rate 3.68% 3.48%
Expected dividend yields 3.70% 3.70%
Fair value per award 54.0p 40.2p
30. Unrecognised items
30.1 Contingencies and commitments
The Group has no capital commitments, no material contingent liabilities and
no contingent assets.
30.2 Events occurring after the reporting period
There have been no reportable subsequent events.
31. Dividends
A 2022 ordinary dividend of 1.2 pence per share was paid on 26 June 2023
amounting to £3.5m (2022: £3.3m at 1.1p per share).
A 2023 special dividend of 1.5 pence per share was paid on 9 May 2023
amounting to £4.4m (2022: £8.9m at 3.0p per share).
A 2023 special dividend of 4.0 pence per share was paid on 6 October 2023
amounting to £11.8m (2022: £10.3m at 3.5p per share).
Subject to approval at the Annual General Meeting on 1 May 2024, a 2023 final
dividend of 1.3 pence per share will be paid on 27 June 2024 to holders on the
register on 31 May 2024. The ordinary shares will be quoted ex-dividend on 30
May 2024. In addition, the Board has decided to declare a special dividend of
2.0 pence per share, with an ex-dividend date of 2 May 2024, a record date of
3 May 2024 and a payment date of 30 May 2024.
32. Related parties
32.1 Controlling shareholder
The ultimate parent undertaking as at 31 December 2023 was CHP Software and
Consulting Limited (the 'ultimate parent'), which was the parent undertaking
of the smallest and largest group in relation to these consolidated financial
statements. Following an internal reorganisation within the CHP group, the
ultimate parent (from 12 January 2024 onwards) is CHP Software and Consulting
Holdings Limited. The ultimate controlling party is Andrew Page.
32.2 Basis of consolidation
The principal subsidiaries and joint ventures of the Group and the Group
percentage of equity capital are set out below. All these are consolidated
within the Group's financial statements with the exception of Alfa iQ which is
accounted for using the equity method.
Registered address and country of incorporation Principal Held by Company Held by Held by Company Held by
activity
2023
Group
2022
Group
2023
2022
Alfa Financial Software Group Limited Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Holding 100% 100% 100% 100%
company
Alfa Financial Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Software and services - 100% - 100%
Software Limited
Alfa Financial Software Inc 124 E Hudson Ave, Royal Oak, MI 48067, United States Software and services - 100% - 100%
Alfa Financial Software Australia Pty Limited Lisgar House, Level 3, 32 Carrington Street, Sydney, NSW, 2000, Australia Services - 100% - 100%
Alfa Financial Software NZ Limited Level 1 Building B, 600 Great South Road, Greenlane, Auckland 1051, New Services - 100% - 100%
Zealand
Alfa Financial Software GmbH Peter-Müller-Straße 3, Düsseldorf Airport City BC GmbH & Co. KG, Software and services - 100% - 100%
40468 Düsseldorf, Germany
Alfa Financial Software International Limited Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Software and services (Dormant) - 100% - 100%
Alfa iQ Limited* Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Software and services - 51% - 51%
*The activity in the Alfa iQ joint venture ceased in late 2023 and the
structure is now in the process of being formally dissolved.
32.3 Transactions with related parties
Full details of the Directors' compensation and interests are set out in the
Directors' Remuneration Report. See note 8 for further detail on remuneration
of key management (including Directors).
Dividends to the amount of £11.8m were paid to the ultimate parent (2022:
£15.0m).
Dividends of 1.5 pence, 1.2 pence and 4.0 pence per share were paid to all
shareholders in 2023 (2022: 3.0 pence, 1.1 pence and 3.5 pence per share).
Directors and other key management received dividends based on their
beneficial interest in the shares of the Company. Directors' beneficial
interests in the shares of the Company are disclosed in the Remuneration
Report.
In 2020, the Group invested £0.4m in Alfa iQ consisting of: a capital
contribution of £0.3m; and an interest-free loan fair valued at £0.1m.
At 31 December 2023 the investment is carried at £nil (2022: £0.1m) and the
loan is carried at £nil (2022: £0.1m). This is because the activity in the
Alfa iQ joint venture ceased in late 2023 and the structure is in the process
of being formally dissolved. In 2023 Alfa Financial Software Limited paid
expenses of £0.1m (2022: £0.1m) on behalf of Alfa iQ Limited (relating to
computer costs and payroll) and these were fully recharged back to Alfa iQ
Limited at no mark up.
On 29 July 2022, the Group reached an agreement for the assignment of its
lease to the 9th floor of Moor Place, 1 Fore Street Avenue, London (including
a car parking space) to the ultimate parent. There is no consideration for the
transaction, with the ultimate parent taking on all the rights and liabilities
for the 9th floor from Alfa. The assignment of the lease resulted in the
de-recognition of the right of use asset and lease liability, which resulted
in a one-off gain of £0.6m which was fully recognised in 2022.
In 2022, the Company had rental income of £0.4m from a short-term rental
agreement with the ultimate parent for rental of the 9th Floor of Moor Place.
There was no such income in 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 2022 the Company also received rental income of £3,718 relating
to its prior arrangement with the ultimate parent for the rental of a meeting
room on the 9th Floor of Moor Place. There was no such income in 2023 due to
the assignment mentioned above.
In 2023, the Company paid property expenses of £0.04m (2022: £nil) on behalf
of the ultimate parent and these were fully recharged back to the ultimate
parent at no mark up.
In 2023, the Company sold two debentures to the ultimate parent for £0.2m
(2022: nil). The transaction was at arm's length.
The balances outstanding from the ultimate parent at 31 December 2023 and 2022
were £nil and £nil respectively. There were no other outstanding receivable
balances from related parties at the end of the reporting period.
33. Offsetting assets and liabilities
Assets and liabilities are offset and the net amount is reported in the
consolidated statement of financial position where Alfa currently has a
legally enforceable right to offset the recognised amounts, and there is an
intention to realise the asset and settle the liability simultaneously.
The following table presents the recognised assets and liabilities that are
offset as at 31 December 2023 and 31 December 2022 in the consolidated
statement of financial position.
31 December 2023 Gross Amounts Net amounts presented
£m
amounts
offset
Accrued income 5.5 (0.9) 4.6
Contract liabilities - deferred licence (8.9) 0.9 (8.0)
31 December 2022 Gross Amounts Net amounts
£m amounts offset presented
Accrued income 15.6 (9.1) 6.5
Contract liabilities - deferred licence (17.7) 9.1 (8.6)
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The responsibility statement below has been prepared in connection with the
annual report and financial statements for the year ended 31 December 2023.
Certain parts thereof are not included within this Preliminary Announcement.
The Directors confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole; and
- the strategic report, contained within the annual report
and financial statements for the year ended 31 December 2023, includes a fair
review of the development and performance of the business and the position of
the Company and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
that they face.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Alfa Financial Software
Holdings PLC websites. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
This responsibility statement was approved by the Board of Directors and is
signed on its behalf by:
Andrew Denton
Chief Executive Officer
13 March 2024
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