REG - Alfa Financial Soft - Full Year Results for year ended 31 December 2024
13/03/2025 07:15
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RNS Number : 4561A Alfa Financial Software Hldgs PLC 13 March 2025
13 March 2025
Alfa Financial Software Holdings PLC
Full Year Results for the year ended 31 December 2024
Breakthrough year, record TCV, total final dividend up 15%
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 2024 ("the period").
Financial highlights:
· Record TCV of £221.3m up 34% (2023: £165.3m) with growth across
the business
· Next 12 months' TCV up 43% to £95.7m (2023: £67.0m) supporting
strong growth in 2025
· Revenue up 8% versus 2023, driven by strong subscription revenues
growth of 18%
· Profit before Tax up 15%
· Continued innovation with £37.1m investment in product (2023:
£35.1m)
· Continued strong cash generation with 89% free cash flow
conversion as expected
· Robust balance sheet position with £20.5m of cash and no bank
debt
· Special dividend declared up 20% to 2.4 pence per share (£7.1m)
(2023: 2.0 pence)
· Proposed final ordinary dividend up 8% to 1.4 pence per share
(£4.1m) (2023: 1.3 pence)
· Total dividends proposed and declared today of 3.8 pence per
share, up 15%
Financial summary
Results
Years ended 31 December Movement
£m, unless otherwise stated 2024 2023 %
Revenue 109.9 102.0 8%
Operating profit 34.3 30.1 14%
Profit before tax 34.1 29.6 15%
Earnings per share - basic (p) 8.68 7.99 9%
Earnings per share - diluted (p) 8.56 7.90 8%
Special dividend declared per share (p) 2.4 2.0 20%
Proposed ordinary dividend (p) 1.4 1.3 8%
£m 2024 2023 Movement %
Cash 20.5 21.8 (6)%
Key measures ((1)) 2024 2023 Movement
£m, unless otherwise stated %
Revenue - constant currency 109.9 100.4 9%
Cash generated from operations 37.3 39.2 (5)%
Operating free cash flow conversion (%) 89% 115% (23)%
Total Contract Value (TCV) 221.3 165.3 34%
((1) See definitions section for further information regarding calculation of
measures not defined by IFRS.)
( )
Strategic highlights:
Accelerating transition to SaaS subscription model
· 18% growth in subscription revenues, fastest growing revenue
stream
· 14% growth in subscription TCV versus last year end
· Subscription revenues have more than doubled since 2019, now
accounting for 34% of total revenues (2019: 23%)
· Alfa Cloud customers now total 21 (2023: 16), 15 live with 6 in
implementation
Strong sales and delivery momentum
· Record 8 new customer wins (2023: 3) and 26 delivery events in
the year
· Strong late-stage pipeline, with 8 prospects at year end
· 5 out of 8 customers in late-stage pipeline are working under
letters of engagement
Increased diversification of customer base over last five years
· Top five customers generated 32% of revenues (2023: 35%, 2019:
61%)
· 21 customers each contributing revenue over £2m in the period
(19 in 2023 and 7 in 2019)
· Largest customer accounted for 7% of revenues (2023: 10%, 2019:
20%)
Sustained investment in product, people, planet
· Continued innovation with £37.1m investment in product (2023:
£35.1m)
· Alfa Systems 6 launch successfully completed during the year
· Average headcount of 485 up 5% versus 2023 with high staff
retention (96%)
· Joined United Nations Global Compact (UNGC)
Outlook
The exceptionally strong conversion of wins in Q4 2024 has led to us entering
this year with a record level of TCV, setting an excellent foundation for
continued growth and underpinning our confidence in the year ahead. Building
on the strong subscription growth in 2024 we expect mid-teens growth in
subscription revenues in FY2025, alongside strong momentum in our Delivery and
Software Engineering revenues as we implement some key projects for new
clients, driving an expectation of double-digit revenue growth overall. The
market's strong response to the launch of Alfa Systems 6 in 2024 has endorsed
the success of our strategy of continuous investment in our business and we
remain well positioned for further progress and focused on delivering value in
2025 and beyond.
Andrew Denton, Chief Executive Officer
"2024 was a breakthrough year for Alfa marked by the successful launch of Alfa
Systems 6, a record number of wins across our major markets and, to meet the
strong demand for our products we have continued to recruit high-quality
people, ending the year with more than 500 people working for Alfa. We
continue to invest in Alfa Systems 6 to expand our functional and technical
lead over our competition, whilst continuing to deliver reliably for our
customers.
"The year's strong sales, financial performance and operational execution,
along with our very healthy pipeline has reinforced the strength of our
strategy and we remain confident in the outlook for the business."
Enquiries:
Alfa Financial Software Holdings PLC +44 (0)20 7588 1800
Andrew Denton, Chief Executive Officer
Duncan Magrath, Chief Financial Officer
Andrew Page, Executive Chairman
Teneo +44 (0)20 7353 4200
James Macey White
Victoria Boxall
Barclays +44 (0)20 7623 2323
Robert Mayhew
Anusuya Gupta
Investec +44 (0)20 7597 4000
Patrick Robb
Virginia Bull
Panmure Liberum Ltd +44 (0)20 3100 2000
Rupert Dearden
James Sinclair-Ford
Investor and analyst webcast
The Company will host a conference call today at 09:45am. To obtain details
for the conference call, please email alfa@teneo.com (mailto:alfa@teneo.com)
. Please dial in at least 10 minutes prior to the start time.
An archived webcast of the call will be available on the Investors page of the
Company's website https://www.alfasystems.com/en-eu/investors
(https://www.alfasystems.com/en-eu/investors)
Notes to editors
Alfa has been delivering leading-edge technology to the global asset finance
and leasing industry since 1990. Our specialised expertise enables us to
deliver the most challenging systems transformation projects successfully.
Alfa Systems, our class-leading SaaS platform, is at the heart of the world's
largest and most progressive asset finance operations. Supporting all types of
automotive, equipment and wholesale finance, Alfa Systems is proven at volume
and across borders, and trusted by leading brands to manage complex
portfolios, drive efficiency and sustainability, and enhance the customer
experience.
With full functionality for originations, servicing and collections, Alfa
Systems is live in 37 countries, representing an integrated point solution, a
rapid off-the-shelf implementation, or an end-to-end platform for the complex
global enterprise. Alfa Systems 6, a breakthrough iteration of our software
platform, launched in 2024.
Alfa maintains exceptional customer satisfaction through an impeccable track
record, with our experience and performance unrivalled in the industry. Our
customers stick with us for the long term because we deliver value that lasts
for decades.
Alfa has offices in Europe, Australasia and the Americas. For more
information, visit us at alfasystems.com or on LinkedIn.
Renaming revenue streams
Over the last few years, the Company has transitioned away from selling
perpetual licences to a SaaS licence model, in line with wider market trends
and shifting customer demand. We have therefore decided to align the
terminology of our revenue streams more accurately with the underlying
revenues.
The remaining small amount of licence income is now largely recognised within
the Subscription revenue stream and the Software Engineering revenue stream
mainly represents revenue generated from our Software Engineering team.
Delivery revenue arises from work delivered by our delivery teams in the form
of new implementations, upgrades or delivery of other projects.
The methodology for which revenues are recognised and disclosed within each
revenue stream remains unchanged, this is simply a change of name.
· Software revenue stream is now named Software Engineering
· Services revenue stream is now named Delivery; and
· No change of name for the Subscription revenue stream.
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
Breakthrough year
We look back on 2024 as a year of breakthroughs, whilst maintaining our
excellent delivery record, we:
· Launched Alfa Systems 6
· Moved to SaaS only sales strategy
· Achieved landmark contract wins in all our markets
· Generated record TCV of £221m
· Grew total Alfa headcount to over 500 people
· Grew our US operation to over 100 colleagues
· Grew our customer base so that our top 5 customers now account
for less than a third of our revenues
We have made significant strategic progress in 2024 increasing our functional
lead over our competition with the release of Alfa Systems 6.
We have continued to grow the business despite the revenue headwinds from our
transition from a perpetual licence to a SaaS model. We now have a SaaS only
sales strategy.
We had a record year for customer wins, converting eight customers from the
late-stage pipeline, which led us in the second half of the year to increase
our recruitment targets in both EMEA and the US.
The success we have had in winning US Auto clients means that we believe we
are now the go-to solution for that market. We have also opened-up a new area
of this market with the introduction of our Total Originations capability as
part of the Alfa Systems 6 launch.
We have continued to grow the Company, ending the year with global headcount
in excess of 500, with over 100 people in the US, and at the same time we have
maintained the extremely strong Alfa culture.
Our diversification across end markets and customers means that our top 5
customers now account for less than a third of our revenues, five years ago
they were nearly two-thirds of our business.
Our delivery excellence remains a key differentiator for us, and this has
continued in 2024 with twenty-six delivery events in the year.
Strong growth driven by fast growing subscription revenues
Financial performance was strong with continued growth in revenue and profit.
Revenue was up 8% to £109.9m (2023: £102.0m) at actual exchange rates or up
9% at constant currency rates.
Subscription revenues continued to grow strongly, up 18% year on year largely
driven by growth from existing customers. The impact of new customer wins on
subscription revenues and margins will be much more pronounced after go-live,
which depending on the project can take several years as contract volumes ramp
up to full run rate on the system, acting as a foundation for future growth
acceleration.
Delivery revenues were up 1% to £55.0m (2023: £54.6m). We expect stronger
growth in 2025 as the implementation of new projects we won in Q4 2024 start
to ramp up.
Software Engineering revenue increased strongly in the second half, up 70% to
finish the year at £17.4m (2023: £15.6m) up 12% on prior year and with a
good pipeline of work for 2025.
We delivered strong growth in operating profit, increasing 14% to £34.3m
(2023: £30.1m) on the back of the 8% growth in revenues at an improved gross
margin of 64.5% (2023: 62.5%) which flows through to an improved operating
margin of 31.2% (2023: 29.5%). Cash conversion in the year was 89% (2023:
115%), as expected this was lower than 2023 which benefited from an unusually
high level of receipts just before the December 2023 year-end. As the SaaS
model becomes more embedded, cash conversion will trend over time to between
90% - 100%. We finished the period with cash of £20.5m (31 Dec 2023:
£21.8m).
Pipeline conversions driving very strong TCV growth
We saw very significant growth in our TCV through the year with the conversion
of eight customers from the late-stage pipeline with TCV reaching a record
level of £221.3m at the end of the year. We have continued to see strong
growth in our Subscription TCV but the most significant increases were in
Delivery and Software Engineering TCV, as these increase immediately when
contracts are signed. At the point of contract win the Subscription TCV is
relatively low, but increases over time as we get closer to go-live and full
run rate revenues.
We had 21 customers each contributing revenues of more than £2m in the
period, up from 19 last year and up from just seven in 2019. Our top five
customer concentration has significantly reduced to 32% of our revenues in
2024, compared with 61% in 2019. Our largest customer represented just 7% of
our revenues in 2024.
Delivery and Software Engineering agility
In 2023 we saw more go-lives than any other year in Alfa's history. Following
this in 2024 we started work with an unprecedented number of large customers.
We continue to focus on simplifying and increasing the speed of our
implementations so that we can deliver more concurrent implementations. Alfa
Cloud has been the most significant contributor to this process, allowing us
to start implementations quickly and enabling us to demonstrate system
functionality to clients much earlier in the project than before. At the
year-end there were six implementations underway with Alfa Cloud.
The transition to new projects means that our software engineering teams have
been pivoting in the second half of 2024 and into the first half of 2025 away
from Alfa Systems 6 to supporting these new large projects with customer
driven development. Whilst the focus may have shifted, there continues to be
ongoing investment into the product to maintain and grow our market lead.
We invested into our UK Equipment Start and US Auto Start products to
facilitate further growth in these markets.
Expanding Alfa Systems 6 functionality
In 2024 we saw the complete launch of Alfa Systems 6. This has been a hugely
important step in showcasing our ongoing product investment in both functional
and technical capabilities. Functional investment increases our product
capability for existing markets but also expands our addressable market.
Technical investment includes the use of the latest software tooling,
including integration and AI capabilities.
The ten new modules that have been released cover additional functionality,
such as 24/7 and Compose, they also cover new financial product capabilities
such as usage based charging and revolving credit facilities, opening up
incremental sales opportunities. These new modules not only open up
incremental sales opportunities to existing customers but also open up new
markets for us in Commercial Finance and US Originations, which have the
potential to significantly increase our addressable markets. We believe it is
really important to continue to invest in both functional and technical areas
and this will continue in 2025.
Headcount growth, supported by strong retention
The successful conversion of the pipeline during the year resulted in us
accelerating recruitment plans in the second half. Retention rates have
remained very high, being 96% for the year. This demonstrates the continued
strength of the Alfa culture which is a key driver of our success.
Headcount at the end of the year was up 6% at 502 (2023: 475) with average
headcount in the period of 485 (2023: 463) up 5% on last year.
Strategic progress
Alfa is a software and delivery company. Our strategy for creating long-term,
sustainable business value is to:
· Strengthen - grow our differentiation
· Scale - increase our capacity
· Sell - further profitable growth
· Simplify - enable more concurrent implementations, more
efficiently
During 2024 we have made good progress across all of these areas, with key
highlights noted below.
Strengthen:
· Launch of Alfa Systems 6
· Refreshed our software development model
· Invested in our people, increasing internal learning and
development resources
· Refreshed our induction approach for new joiners
Scale:
· Increased headcount to over 500 people
· Investigating an increase in our global footprint through further
geographic smart hubs
· Expanding addressable market into US Auto Originations and
Commercial Finance
· Improved process for partner onboarding
Sell:
· Record eight wins
· Sold first US Auto Originations implementation
· Continuing sequential growth in subscription revenues
· Moved to single-tenant SaaS-only sales strategy
Simplify
· Completed enabling investment for our partner-led delivery MVP in
UK Equipment
· Completed an accelerated implementation with Alfa Start for a US
Auto customer
· Improved migration tooling
· Further automated testing to simplify upgrades
All of the above have contributed to making significant progress on our
strategy, with the strongest evidence being revenue growth of 9% (at constant
currency) comfortably exceeding average headcount growth of 5% and with
Subscription revenues growing at 18% - the fastest growing revenue stream.
Capital return
We are a highly cash-generative business, with cash conversion of 89% in 2024,
which as expected was down on 2023 due to some early receipts at the end of
2023. We expect cash conversion to trend towards 90 - 100% over time. We are
committed to investing in our product and people to ensure that we continue to
offer market leading solutions and excellent delivery and service to our
customers.
Our mechanism for returning capital is the payment of a regular, ordinary
final dividend and we have a policy to grow this progressively. We will also
consider special dividends when we have excess capital.
Notwithstanding the return of £22.1m excess cash to shareholders during the
year through ordinary and special dividends, we ended the period with cash of
£20.5m. As such, the Board has today proposed an ordinary dividend of 1.4
pence per share, up 8%, with an ex-dividend date of 29 May 2025, a record date
of 30 May 2025 and a payment date of 27 June 2025. The ordinary dividend would
amount to a total payment of c.£4.1m. In addition, the Board has decided to
declare a special dividend of 2.4 pence per share, up 20% on the special
dividend declared this time last year, with an ex-dividend date of 1 May 2025,
a record date of 2 May 2025 and a payment date of 30 May 2025. The special
dividend would amount to a total payment of c.£7.1m.
Stable market conditions
Whilst over the last few years the macro environment has been uncertain, the
asset finance market and demand for software within it has remained robust.
The asset finance market is a more secure form of lending and it has a history
of gaining market share in uncertain times compared with non-asset backed
lending markets. Alfa Systems is operational in 37 countries; in automotive
finance, equipment finance, wholesale finance and loan finance; for OEMs,
banks and independents and across all asset classes. The breadth and diversity
of Alfa's business interests has helped insulate us from underlying economic
uncertainty in individual markets as demonstrated by our ongoing track record
of growth, our record TCV and strong pipeline.
Strong pipeline
We had a hugely successful year in 2024 in converting the late-stage pipeline,
with a record eight customer wins coming out of the pipeline. We ended the
year with eight customers in the late-stage pipeline, of which five are
already engaged in paid work under letters of engagements on implementations
as we finalise commercial contracts. We are seeing good activity in the
early-stage pipeline, reinforced by strong positive customer reaction to Alfa
Systems 6 before and during the recent conference season.
We remain confident in both the demand for our best-in-class software and our
ability to win work in the market.
Net-zero commitment and UNGC
The majority of our emissions come from our supply chain so engaging with
suppliers and working with them to reduce their emissions is fundamental to
the overall success of us achieving our SBTi targets. During 2024 we started
an engagement process with our key suppliers. Generally across our key
suppliers we can see that there is a strong desire to reduce emissions.
During the year we joined the UN Global Compact (UNGC) which will help us
drive forwards our corporate sustainability agenda.
Outlook
The exceptionally strong conversion of wins in Q4 2024 has led to us entering
this year with a record level of TCV, setting an excellent foundation for
continued growth and underpinning our confidence in the year ahead. Building
on the strong subscription growth in 2024 we expect mid-teens growth in
subscription revenues in FY2025, alongside strong momentum in our Delivery and
Software Engineering revenues as we implement some key projects for new
clients, driving an expectation of double-digit revenue growth overall. The
market's strong response to the launch of Alfa Systems 6 in 2024 has endorsed
the success of our strategy of continuous investment in our business and we
remain well positioned for further progress and focused on delivering value in
2025 and beyond.
FINANCIAL REVIEW
Financial results
2024 2023 Movement
£m %
Revenue 109.9 102.0 8%
Gross profit 70.9 63.7 11%
Operating profit 34.3 30.1 14%
Profit before tax 34.1 29.6 15%
Taxation (8.5) (6.1) 39%
Profit for the period 25.6 23.5 9%
Basic EPS 8.68p 7.99p 9%
Diluted EPS 8.56p 7.90p 8%
Revenues increased by 8% or £7.9m to £109.9m in the 12 months ended 31
December 2024 (2023: £102.0m), with growth at constant currency stronger at
9%. Revenues grew very strongly in North America, up 37% on the back of some
large customer wins over the last 18 months, and now account for 42% (2023:
33%) of revenues.
Gross profit increased to £70.9m (2023: £63.7m) up £7.2m, with gross margin
at 64.5% (2023: 62.5%) with the increase in gross margin as a result of
increased capitalisation of costs from more investment focused on new modules.
Sales, General & Admin expenses increased to £36.6m (2023: £34.3m) with
the largest increase due to increased headcount in Sales, Legal &
Commercial and Information Security. There were also increased computer costs
as we closed two data centres moving to a Cloud-based solution, reducing the
need for future capex. Other cost increases included health costs and profit
share. Other income was £0.0m (2023: £0.7m). Overall operating profit
increased by 14% to £34.3m (2023: £30.1m) with profit before tax of £34.1m
(2023: £29.6m).
The Effective Tax Rate ("ETR") for 2024 was 24.9% (2023: 20.6%), the
increase being principally due to the impact of the increase in the UK
corporation tax rate from 23.5% to 25.0% for 2024 and the change in R&D
relief. Profit for the period was £25.6m (2023: £23.5m).
Revenue
Revenue - by type Movement
£m 2024 2023 %
Subscription 37.5 31.8 18%
Software Engineering 17.4 15.6 12%
Delivery 55.0 54.6 1%
Total revenue 109.9 102.0 8%
Subscription - Strong sequential growth in subscription revenues
Subscription revenues arise from revenues from SaaS and other recurring
services
Overall subscription revenues increased strongly by 18% to £37.5m (2023:
£31.8m) with growth driven from both new and existing customers. Subscription
customers now total 39 (2023: 35) and 60% of subscription revenues come from
customers using Alfa Cloud. Subscription revenues now account for 34% of
overall revenues (2023: 31%)
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 an upgrade timetable dictated to them.
Our SaaS services are ISO 27001 and ISO 27018 certified and SOC1 and SOC2
audited to confirm compliance with controls around data security and
availability. Given the mission-critical nature of our systems for our
customers, having such third-party verification of our compliance with these
standards is a key selling point.
Software Engineering - Strong H2 for chargeable work
Software Engineering revenues largely arise from chargeable development work
for new and existing customers, along with some perpetual licence recognition
Software Engineering revenues for the year increased by 12% on the back of new
customer startups. We also saw a reduction in the customised perpetual
licence recognition down to £3.3m in the year (2023: £4.4m) as a consequence
of the successful transition to a subscription SaaS model. There were one-off
licence revenues of £0.8m (2023: £0.7m).
Our strategy is to continue to develop our software, to ensure that we meet
and exceed customer and market needs as they evolve and as the regulatory and
commercial environment continues to change. We have the industry leading
software and we continue to invest to increase that lead, through a balance of
customer funded development and self-funded development.
Delivery - High quality delivery
Delivery revenues arise from work for existing customers delivering new
modules, upgrades, migrations and other services, as well as work with new
customers on project definition and implementation of Alfa Systems.
Following a record year of deliveries in 2023, in 2024 we saw six new large
projects start-up. These projects are multi-year projects with go-lives in
subsequent years. Overall Delivery revenues increased by 1% to £55.0m (2023:
£54.6m) at actual exchange rates.
Total revenues from existing customers, including V4 to V5 upgrades was
£38.7m (2023: £36.1m). Within this, as expected, V4 to V5 upgrades are
slowing down as we come to the end of that program and they accounted for 12%
(2023: 17%) of total Delivery revenue. As V4 to V5 projects are replaced by
new projects this will further boost Subscription revenues due to the higher
incremental Subscription revenues they will generate in the future.
We had 26 delivery events in the year which as expected was down on the record
35 last year. As noted 2024 was more about starting up new projects, however
there were three go-lives during the year, one v4 to v5 upgrade in the UK, and
then two smaller initial go-lives for automotive customers, one in the UK and
one in the US, as part of multi-year projects with multiple go-lives.
Total Contract Value (TCV)
TCV - by stream Movement
£m 2024 2023 %
Subscription 136.7 119.5 14%
Software Engineering 24.6 17.8 38%
Delivery 60.0 28.0 114%
Total TCV 221.3 165.3 34%
Total contract value (TCV) at 31 December 2024 was £221.3m (31 December 2023:
£165.3m). TCV grew strongly on the back of the record eight wins during the
year and also due to the continuing growth in subscription TCV.
TCV - by stream for next 12 months Movement
£m 2024 2023 %
Subscription 41.9 37.1 13%
Software Engineering 13.5 8.7 55%
Delivery 40.3 21.2 90%
Total TCV 95.7 67.0 43%
Of the TCV at 31 December 2024, £95.7m (2023: £67.0m) is currently
anticipated to convert into revenue within the next 12 months. The
subscription portion increased 13% to £41.9m (2023: £37.1m). The strongest
growth came from Software engineering TCV, up 55% to £13.5m (2023: £8.7m)
and Delivery TCV up 90% to £40.3m (2023: £21.2m) due to the strong
conversion of the late-stage pipeline. At 2023 year end we were working with
a number of companies in the late-stage pipeline and whilst we expected the
projects to continue, as they were not fully contracted they were not fully
included in TCV, hence the very strong growth in the TCV figure.
Operating profit
The Group's operating profit increased by £4.2m to £34.3m in 2024 (2023:
£30.1m) primarily reflecting the £7.9m increase in revenue offset by cost
increases of £3.7m.
Headcount numbers were up 6% at 31 December 2024 at 502 (2023: 475), with
average headcount of 485 up 5% on last year (2023: 463). Staff retention
remained very high at 96%.
Expenses - net Movement
£m 2024 2023 %
Cost of sales 39.0 38.3 2%
Sales, general and administrative expenses 36.6 34.3 7%
Other income 0.0 (0.7) -
Total expenses - net 75.6 71.9 5%
Cost of sales increased by £0.7m to £39.0m (2023: £38.3m) to support the
growth in the business. This was due to higher headcount and salary costs
along with increased hosting costs from the increasing scale of that business,
offset by increased capitalised investment into the product as our engineering
resources focused on Alfa Systems 6 as opposed to chargeable client work.
Sales, general and administrative (SG&A) increased to £36.6m in the year
(2023: £34.3m). Salary costs were up 9% in the period to £14.1m (2023:
£12.9m). Profit Share Pay, including employer's costs, in the period was
£4.2m (2023: £3.8m). Share-based payment charges have decreased slightly
from last year to £1.4m (2023: £1.6m). Foreign currency gains/losses were a
gain of £0.5m, up from the gain of £0.3m last year. Other costs totalling
£17.4m increased £1.1m on last year (2023: £16.3m) with, as expected,
increased computer costs. In 2023 there were £0.6m of costs related to
possible offers for Alfa.
Other income reduced from £0.7m last year to £0.0m this year largely due to
the reduction in UK R&D Expenditure credit (RDEC).
Profit before tax
Overall profit before tax of £34.1m was up 15% on last year (2023: £29.6m).
Net finance costs were unchanged at £0.2m (2023: £0.2m).
Profit for the period
Profit after taxation increased by £2.1m, or 9%, to £25.6m (2023:
£23.5m). The Effective Tax Rate for 2024 was 24.9% (2023: 20.6%). The
increase was due to 2024 being the first full year of the increased UK
corporation tax rate of 25% along with the 2023 rate benefiting from a prior
year R&D claim. There is no longer any benefit from R&D on the tax
line, with the reduced benefit from the RDEC scheme being shown in other
income.
Earnings per share
Basic earnings per share increased by 9% to 8.68 pence (2023: 7.99 pence).
Diluted earnings per share also increased by 8% to 8.56 pence (2023: 7.90
pence).
Cash flow
As expected, cash generated from operations was down year on year at £37.3m
(2023: £39.2m) due to the impact of some receipts received in December 2023
which we would have expected to receive in January 2024. Net cash generated
from operating activities was £28.4m (2023: £32.2m) with tax payments of
£8.2m up on the £6.5m for 2023 largely due to the increase in corporation
tax expense.
Cash (including the effect of exchange rate changes) decreased by £1.3m to
£20.5m at 31 December 2024, from £21.8m at 31 December 2023. There was
£28.4m of net cash generated from operating activities (2023: £32.2m). Total
dividends paid in the year, being the ordinary and two special dividends,
increased by 12% to £22.1m (2023: £19.7m). Purchases of own shares in the
period were £0.7m (2023: £4.8m) down on last year as they were purely for
shares into the Employee Benefit Trust, whereas last year there were also
treasury shares purchased in the period. Net capital expenditure of £5.6m
was up on last year (2023: £3.4m) due to as expected increased investment
into the product, up to £5.3m (2023: £2.8m) and with other capex of £0.3m
(2023: £0.6m).
Operating free cash flow conversion
£m 2024 2023
Cash generated from operations 37.3 39.2
Adjusted for:
Capital expenditure (5.6) (3.4)
Principal element of the lease payments in respect of IFRS 16 (1.3) (1.3)
Operating free cash flow 30.4 34.5
Operating profit 34.3 30.1
Operating free cash flow conversion 89% 115%
The Group's Operating Free Cash Flow Conversion (FCF) of 89% (2023: 115%) was
down on last year. Cash conversion was impacted by receipts in December 2023
that we would normally have expected to be received in January 2024. As
previously noted, the move away from perpetual licenses to a SaaS model will
result in cash conversion going forwards averaging between 90% to 100%.
Balance sheet
The significant movements in the Group's balance sheet, aside from the cash
balance which is described above, from 31 December 2023 to 31 December 2024
are detailed below.
As expected, trade receivables increased from the very low level at 31
December 2023 of £5.6m, which had benefited from some early payments from
customers, to £8.6m at 31 December 2024. They remain extremely tightly
controlled with overdue debtors only £0.5m (2023: £0.6m) and these are all
within 30 days overdue. All of the year end receivables have now been
collected.
Accrued income was substantially in line with last year end at £4.7m (31
December 2023: £4.6m). Corporation tax recoverable of £2.8m (31 December
2023: £1.9m) is principally due to amounts expected to be received related to
R&D claims.
Trade and other payables balance increased by £1.7m to £11.7m (31 December
2023: £10.0m) which was driven primarily by an increase in amounts due
relating to tax and social security.
Contract liabilities relating to software licences was largely unchanged at
£8.1m (31 December 2023: £8.0m). Contract liabilities from deferred
maintenance increased to £7.6m (31 December 2023: £6.2m) with the largest
factor due to the timing of invoicing and receipts on one customer. We expect
a £1.8m reversal of this in 2025.
Going concern
The financial statements are prepared on the going concern basis. This is
considered appropriate due to the reasons stated in note 1.1.
Subsequent events and related parties
There have been no subsequent events that require disclosure. Details about
related party transactions are disclosed in note 32.
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
Calculated as cash generated from operations, less capital expenditures, less
the principal element of lease payments in respect of IFRS16. Operating free
cash flow conversion represents operating free cash flow generated as a
proportion of operating profit.
Operating FCF is calculated as follows:
2024 2023
Unaudited £m £m
Cash generated from operations 37.3 39.2
Capital expenditure (5.6) (3.4)
Principal element of lease payments (1.3) (1.3)
Operating FCF generated 30.4 34.5
Operating profit 34.3 30.1
Operating FCF Conversion 89% 115%
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 assuming these
services continued as planned (actual contract length varies by customer);
(ii) the estimated remaining time to complete Delivery and Software
Engineering 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 Delivery and Software Engineering 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 2024 H1 2024 H2 2023
USD 1.30 1.27 1.25
EUR 1.18 1.17 1.15
Consolidated statement of profit or loss and comprehensive income
£m Note 2024 2023
Continuing operations
Revenue 5 109.9 102.0
Cost of sales (39.0) (38.3)
Gross profit 70.9 63.7
Sales, general and administrative expenses (36.6) (34.3)
Other income - 0.7
Operating profit 6 34.3 30.1
Share of net loss of joint venture 19 - (0.3)
Profit before net finance costs and tax 34.3 29.8
Finance income 10 0.5 0.3
Finance expense 10 (0.7) (0.5)
Profit before taxation 34.1 29.6
Taxation 11 (8.5) (6.1)
Profit for the financial year 25.6 23.5
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations 27 (0.1) (0.2)
Other comprehensive (loss) net of tax (0.1) (0.2)
Total comprehensive income for the year 25.5 23.3
Earnings per share (in pence)
Basic 12 8.68 7.99
Diluted 12 8.56 7.90
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 2024 2023
Assets
Non-current assets
Goodwill 14 24.7 24.7
Other intangible assets 15 9.3 5.0
Property, plant and equipment 16 0.7 1.0
Right-of-use assets 17 7.7 6.1
Deferred tax assets 18 0.5 0.3
Total non-current assets 42.9 37.1
Current assets
Trade receivables 20 8.6 5.6
Accrued income 21 4.7 4.6
Prepayments 21 4.9 3.8
Other receivables 21 0.3 0.3
Corporation tax recoverable 21 2.8 1.9
Cash and cash equivalents 22 20.5 21.8
Total current assets 41.8 38.0
Total assets 84.7 75.1
Liabilities and equity
Current liabilities
Trade and other payables 23 11.7 10.0
Lease liabilities 24 0.1 1.4
Contract liabilities 23 15.7 14.2
Total current liabilities 27.5 25.6
Non-current liabilities
Lease liabilities 24 9.2 6.8
Provisions for other liabilities 25 0.8 0.7
Deferred tax liabilities 18 1.0 -
Total non-current liabilities 11.0 7.5
Total liabilities 38.5 33.1
Capital and reserves
Share capital 26 0.3 0.3
Translation reserve 27 0.1 0.2
Own shares 28 (7.9) (8.7)
Retained earnings 53.7 50.2
Total equity 46.2 42.0
Total liabilities and equity 84.7 75.1
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 shares Translation Retained Equity
reserve
earnings
attributable to
owners of the
parent
Balance as at 1 January 2023 0.3 (7.5) 0.4 48.8 42.0
Profit for the financial 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
Profit for the financial year - - - 25.6 25.6
Other comprehensive (loss) - - (0.1) - (0.1)
Total comprehensive income for the year - - (0.1) 25.6 25.5
Transactions with owners in their capacity as owners:
Equity-settled share-based payment schemes 29 - - - 1.1 1.1
Equity-settled share-based payment schemes - deferred tax impact 18 - - - 0.4 0.4
Dividends 31 - - - (22.1) (22.1)
Own shares distributed 28 - 1.5 - (1.5) -
Own shares acquired 28 - (0.7) - - (0.7)
Balance as at 31 December 2024 0.3 (7.9) 0.1 53.7 46.2
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated statement of cash flows
£m Note 2024 2023
Cash flows from operating activities
Profit before tax 34.1 29.6
Net finance costs 0.2 0.2
Share of net loss from joint venture - 0.3
Operating profit 34.3 30.1
Adjustments:
Depreciation 6/16/17 1.7 1.8
Amortisation 6/15 1.0 0.7
Share-based payment charge 29 1.1 1.6
RDEC tax charge/(credit) 6 0.1 (0.5)
Increase/(decrease) in provisions 25 0.1 (0.2)
Movements in working capital:
Increase/(decrease) in contract liabilities 23 1.5 (0.6)
(Increase)/decrease in trade and other receivables 20/21 (4.2) 5.8
Increase in trade and other payables (excluding contract liabilities) 23 1.7 0.5
Cash generated from operations 37.3 39.2
Interest element on lease payments 10/24 (0.6) (0.4)
Other interest paid 10 (0.1) (0.1)
Income taxes paid (8.2) (6.5)
Net cash generated from operating activities 28.4 32.2
Cash flows from investing activities
Payments for purchases of property, plant and equipment 16 (0.3) (0.6)
Payments for internally developed software 15 (5.3) (2.8)
Payments in relation to direct costs associated with lease extensions (0.3) -
Interest received 10 0.5 0.3
Net cash outflow from in investing activities (5.4) (3.1)
Cash flows from financing activities
Dividends paid to Company shareholders 31 (22.1) (19.7)
Payments of lease liabilities (principal) 24 (1.3) (1.3)
Purchase of own shares 28 (0.7) (4.8)
Cash used in financing activities (24.1) (25.8)
Net (decrease)/increase in cash (1.1) 3.3
Cash and cash equivalents at the beginning of the year 22 21.8 18.7
Effect of foreign exchange rate changes on cash and cash equivalents (0.2) (0.2)
Cash and cash equivalents at the end of the year 22 20.5 21.8
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
2024
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 develop, implement and support
software and SaaS solutions to the auto and equipment finance industry in the
United Kingdom, Europe, Africa, North America, and Australasia.
1.1 Basis of preparation
Statement of Compliance
The preliminary results for the year ended 31 December 2024 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
2024 Annual Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year ended 31
December 2024.
The financial information has been extracted from the financial statements for
the year ended 31 December 2024, which have been approved by the Board of
Directors on 12 March 2025. 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 2023 have been
extracted from the Group's statutory accounts for that financial year. The
Board of Directors approved the 2023 Group financial statements on 13 March
2024, 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
The Group has not adopted any new and amended standards in the current
financial year that have had any material impact on the disclosures or on the
amounts reported in these financial statements.
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:
· IFRS 9/IFRS 7 - 'Amendments to the Classification and Measurement of
Financial Instruments' (effective 1 January 2026)
· 'Annual Improvements to IFRS Accounting Standards' - Volume 11
(effective 1 January 2026)
· IFRS 18 - 'Presentation and Disclosures in Financial Statements'
(effective 1 January 2027)
The Directors of the Company have not as yet evaluated the impact of these
amendments on the presentation and disclosures of the Group's consolidated
financial statements in future periods.
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 (EBT) because it is exposed
to, and has a right to, variable returns from this EBT and is able to use its
power over the EBT to affect those returns. The EBT 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 had one joint venture, namely Alfa iQ Limited (Alfa iQ), which was
formed in May 2020. Due to the activity in Alfa iQ being brought fully into
the Alfa Group, the Alfa iQ joint venture ceased its activity in late 2023 and
the company was placed into Members Voluntary Liquidation in 2024. The
investment in the joint venture, up to the point of the Members Voluntary
Liquidation, was accounted for using the equity method.
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 Engineering and Delivery.
a) Subscription revenues include recurring revenues paid on a monthly or
annual basis, including subscription licence revenues, maintenance and cloud
hosting.
b) Software Engineering revenues include revenues from the recognition of
customised licence revenue, one-off licence fees and any development revenues.
c) Delivery 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
Engineering.
See note 1.5 for details of our revenue recognition accounting policy and note
2 for the critical accounting judgements 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 2024 and 2023 below:
2024 2023
Closing Average Closing Average
USD 1.25 1.28 1.27 1.24
EUR 1.21 1.18 1.15 1.15
NZD 2.24 2.11 2.01 2.02
AUD 2.02 1.94 1.87 1.87
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).
· 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
Engineering and Delivery (as disclosed in note 1.3).
i. Subscription revenue includes the periodic rights to use Alfa
Systems, periodic maintenance, and subscription (including cloud hosting).
ii. Software Engineering revenue includes chargeable development
revenue, customised licence revenue, options over the right to use Alfa
Systems, and one-off licence fees.
iii. Delivery 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 in this note.
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.
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. Recognition over
time is appropriate because customers simultaneously receive and consume the
benefits provided. A percentage-of-completion basis is used to estimate
progress towards completion of the performance obligation over time. To
calculate the percentage-of-completion, data is derived from timesheets for
the days worked for the customer on implementation work and compared with the
latest forecast of total implementation days to be completed on the project.
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.
Recognition over time is appropriate 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. A percentage-of-completion
basis is used to estimate progress towards completion of the performance
obligation over time. To calculate the percentage-of-completion, data is
derived from timesheets for the days worked for the customer on development
work and compared with the latest forecast of total development days to be
completed on the project.
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 to which they
relate.
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 to which they relate.
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.
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'.
Current tax
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the reporting date in the countries where
the Group and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred tax
Deferred income tax is recognised, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the Group's consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which the temporary
differences can be utilised. Deferred income tax assets and liabilities are
offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes, assets and
liabilities relate to income taxes levied by the same taxation authority on
either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
1.8 Leases
The Group 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 the Group. 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 costs.
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 (CGUs).
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 derecognition
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 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.
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 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 intangible assets are initially measured at cost, and
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.
The cost for internally generated intangible assets is based on the time spent
by staff on product development activities, to which a day rate based on
salary cost is applied. 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.
The Group continually assesses the eligibility of development costs for
capitalisation on a project-by-project basis. See note 15 for disclosure of
development costs which have met the criteria of IAS 38 for recognition.
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 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 EBT, 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
Critical judgements specific to customised licence revenue:
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.
Critical judgements applicable to all revenue:
Judgements are made when the Group enters into new contracts with existing
customers and also when there are changes to existing contracts with customers
that include the addition of new customer-specific contractual terms. For
these, the Group assesses the contractual terms both individually and in the
context of the wider arrangement and applies the guidance in IFRS 15 to
determine the appropriate accounting.
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. Judgement is also required with respect to when an asset is ready to
be amortised - in making this judgement, the Group considers, amongst other
factors, when the asset is available for use in the manner intended by
management.
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 entity's Cash flow forecasting and foreign exchange sensitivity Natural hedging from localised cost base and conversion of foreign currency
functional currency; and cash balances into pounds sterling; and
Monetary assets and liabilities denominated in a currency other than the Use of forward contracts to manage some of the foreign exchange risk (these
entity's functional currency are not hedge accounted)
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 2024 and 2023 to hedge against
foreign currency exposure. The Group has three outstanding commercial foreign
exchange contracts at 31 December 2024 (2023: one outstanding) with a fair
value of £(0.1)m (2023: £0.2m). No hedge accounting has been applied in the
year.
A 10% increase in the USD:GBP exchange rate in the year ended 31 December 2024
would have increased revenue and profit by 4% and 9% respectively (2023: 3%
and 6% 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 2024 (2023:
31 December 2023), 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. On this
basis, the loss allowance as at 31 December 2024 and 31 December 2023 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 2024
Between Between Between
Less than 6 to 12 1 to 2 2 to 5 More than
£m Total 6 months months years years 5 years
Trade and other payables 8.4 8.4 - - - -
Lease liabilities - future lease payments 13.4 0.5 0.3 1.8 4.8 6.0
31 December 2023
Between Between Between
Less than 6 to 12 1 to 2 2 to 5 More than
£m Total 6 months months years 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
4. Segments and principal activities
4.1 Revenue by stream
The Group assesses revenue by type of activity, being Subscription, Software
Engineering and Delivery, as summarised below:
£m 2024 2023
Subscription 37.5 31.8
Software Engineering 17.4 15.6
Delivery 55.0 54.6
Total revenue* 109.9 102.0
* The names of two revenue streams have been changed in 2024 - 'Software' is
now 'Software Engineering' and 'Services' is now 'Delivery'. This is purely a
renaming of the revenue streams which has not impacted the revenue allocation
between the streams, nor the total revenue or profit disclosed for 2023.
4.2 Non-current assets geographical information
Non-current assets attributable to each geographical market:
£m 2024 2023
UK 40.9 35.7
North America 0.8 1.0
Rest of EMEA (excl. UK)(*) - -
Rest of World(*) 0.7 0.1
Total non-current assets 42.4 36.8
* To be consistent with the geographical split in note 5.3, the 'Rest of the
World' assets disclosed in the prior year have been split into 'Rest of EMEA'
and 'Rest of the World'. The total remains unchanged.
Revenue by geographical market is contained within note 5.3. The table above
excludes deferred tax assets for both 2024 and 2023.
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 2024 and 2023.
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 streams:
2024
£m Subscription Software Delivery Total
Engineering Revenue
At a point in time - time and materials - 7.5 43.8 51.3
At a point in time - fixed price - 0.8 - 0.8
Over time - time and materials - 7.6 11.2 18.8
Over time - fixed price 37.5 1.5 - 39.0
Total revenue* 37.5 17.4 55.0 109.9
2023
£m Subscription Software Delivery Total
Engineering 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
All goods and services are sold directly to customers.
* The names of two revenue streams have been changed in 2024 - 'Software' is
now 'Software Engineering' and 'Services' is now 'Delivery'. This is purely a
renaming of the revenue streams which has not impacted the revenue allocation
between the streams, nor the total revenue or profit disclosed for 2023.
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 2024 2023
UK 32.0 38.1
North America 46.1 33.6
Rest of EMEA (excl. UK) 23.6 23.1
Rest of World 8.2 7.2
Total revenue 109.9 102.0
5.4 Revenue by currency
Revenue by contractual currency is as follows:
£m 2024 2023
GBP 40.4 46.3
USD 46.5 34.6
EUR 14.8 13.9
Other 8.2 7.2
Total revenue 109.9 102.0
5.5 Liabilities from contracts with customers
£m 2024 2023
Contract liabilities - deferred licence and fees 8.1 8.0
Contract liabilities - deferred maintenance 7.6 6.2
Total contract liabilities 15.7 14.2
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
2024 and 31 December 2023 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
A number 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 2024 and 31 December 2023 therefore
represents the Group's unsatisfied 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 2024 is
£1.8m (2023: £4.0m). We expect to recognise 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 2024 that relate to the licence customisation for
some 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 2024, the Group also has unsatisfied or partially
satisfied performance obligations at 31 December 2024 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 2024 is £9.9m (2023: £9.4m). 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 £9.9m, it is expected that £3.9m will be recognised in 2025,
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 engineering and delivery).
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 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:
£m 2024 2023
Research and development costs 2.3 3.1
Depreciation of property, plant and equipment 0.6 0.6
Depreciation of right-of-use lease assets 1.1 1.2
Amortisation of intangible assets 1.0 0.7
Foreign exchange (gain)/loss (0.2) 0.1
Forward foreign exchange contracts (gain) (0.3) (0.4)
Share-based payments (including social security contributions) 1.4 1.6
RDEC* 0.1 (0.5)
Costs related to possible offers(**) - 0.6
* The Company intends to claim credits under the UK RDEC regime in respect
of the years 2023 and 2024. The amount of the estimated RDEC credit is
required to be recognised as both other income (which is taxable) and as a
recoverable. The estimated RDEC amount recognised in 2023 was £0.5m. In 2024,
the Company reduced the estimated RDEC benefit for 2023 by £0.3m to £0.2m,
and also recognised an estimated RDEC benefit for 2024 of £0.2m. Accordingly,
as at 31 December 2024, the Company has recognised a total £0.4m of RDEC
credit for 2023 and 2024.
** Costs related to possible offers to acquire the Group of £0.6m were
incurred in 2023. These related to legal fees and expenses incurred as a
result of two possible offers from private equity firms. No such costs were
incurred in 2024.
7. Personnel-related costs
£m 2024 2023
Wages and salaries(*) 44.4 41.3
Social security contributions (on wages and salaries) 5.2 5.1
Pension costs 3.5 3.2
Less: capitalisation(*) (5.3) (2.8)
47.8 46.8
Profit share pay(**) 4.2 3.8
Share-based payments (including social security contributions) 1.4 1.6
Total employment costs 53.4 52.2
* To be consistent with the current year disclosure, the prior year wages
and salaries number has been split into the amount that was expensed and the
amount that was capitalised as part of time spent on internally generated
intangibles. The net number is consistent with the 2023 disclosure.
** 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.
Average monthly number of people employed based on location 2024 2023
(including Executive Directors)
UK 340 334
USA 99 86
Rest of EMEA (excl. UK)(*) 17 14
Rest of World(*) 29 29
Total average monthly number of people employed 485 463
* To be consistent with the geographical split in note 5.3 the 'Rest of the
World' headcount disclosed in the prior year has been split into 'Rest of
EMEA' and 'Rest of the World'. The total remains unchanged.
At 31 December 2024, the Group had 502 employees (2023: 475).
8. Key management
Key management compensation (including Directors):
£m 2024 2023
Wages, salaries and short-term benefits 2.3 2.1
Social security contributions 0.3 0.2
Share-based payments (including social security contributions) 0.5 1.0
Total key management compensation 3.1 3.3
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 2024 2023
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 2024 2023
Finance income
Interest income on cash or short-term bank deposits 0.5 0.3
£m Note 2024 2023
Finance expense
Interest on lease liabilities 24 (0.6) (0.4)
Other interest expense (0.1) (0.1)
Total finance expense (0.7) (0.5)
11. Income tax expense
Analysis of charge for the year
£m 2024 2023
Current tax:
Current tax on profit for the year 6.8 6.1
Adjustment in respect of prior years (0.2) (1.2)
Foreign tax on profit of subsidiaries for the current year 0.7 0.5
Current tax 7.3 5.4
Deferred tax:
Origination and reversal of temporary differences 1.2 0.7
Deferred tax 1.2 0.7
Total tax charge in the year 8.5 6.1
The effective tax rate for the year is in line with (2023: lower than) the
standard rate of corporation tax in the UK. The effective tax rate for the
year ended 31 December 2024 was 24.9% (2023: 20.6%). The effective tax rate
for the year is impacted by favourable adjustments in respect to prior years
totalling £0.2m relating predominately to the UK position for 2023 including
further work on the deductibility of exceptional costs (2023: £1.2m, due
predominately to the benefit of the R&D claim for 2022). Unlike in 2022
and earlier years, the effective tax rate for both 2024 and 2023 does not
benefit from the impact of UK R&D claims, as from 2023 the Company is
required to make R&D claims under the UK RDEC regime.
The overall tax charge for the year is reconciled as follows:
Analysis of charge for the year
£m 2024 2023
Profit on ordinary activities before taxation 34.1 29.6
Profit on ordinary activities at the standard rate of corporation tax
- 25.0% (2023: 23.5%*) 8.5 7.0
Tax effects of:
Adjustment in respect of prior years (0.2) (1.2)
Impact of disallowable items - 0.2
Other 0.2 0.1
Total tax charge for the year 8.5 6.1
* 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
2024 2023
Profit attributable to equity holders of Alfa (£m) 25.6 23.5
Weighted average number of shares outstanding during the year 294,925,812 294,462,166
Basic earnings per share (pence per share) 8.68 7.99
Weighted average number of shares outstanding including potentially dilutive 298,962,970 298,119,816
shares
Diluted earnings per share (pence per share) 8.56 7.90
The weighted average number of ordinary shares in issue excludes 5,074,188
(2023: 5,537,834) shares held by the Group cumulatively under the EBT and as a
result of the share buy-back programme.
The diluted number of ordinary shares outstanding, including share awards, is
calculated on the assumption of conversion of 4,037,158 (2023: 3,657,650)
potentially dilutive ordinary shares.
13. Financial assets and liabilities
£m Note 2024 2023
Financial assets
Financial assets at amortised cost:
Trade receivables 20 8.6 5.6
Other financial assets at amortised cost 21 5.0 4.9
Cash and cash equivalents 22 20.5 21.8
Total financial assets 34.1 32.3
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 23 8.4 8.0
Lease liabilities 24 9.3 8.2
Total financial liabilities 17.7 16.2
14. Goodwill
£m 2024 2023
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% (2023: 10.4%)
which is based on the CGU's weighted average cost of capital. Cash flows
beyond these periods have been extrapolated using a steady 2.5% (2023: 2.7%)
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
Computer Internally Total
software generated
software
£m
Cost
At 1 January 2023 1.7 4.3 6.0
Additions - 2.8 2.8
At 31 December 2023 1.7 7.1 8.8
Amortisation
At 1 January 2023 1.0 2.1 3.1
Charge for the period 0.1 0.6 0.7
At 31 December 2023 1.1 2.7 3.8
Net book value
At 31 December 2023 0.6 4.4 5.0
Cost
At 1 January 2024 1.7 7.1 8.8
Additions - 5.3 5.3
Disposals (0.7) - (0.7)
At 31 December 2024 1.0 12.4 13.4
Amortisation
At 1 January 2024 1.1 2.7 3.8
Charge for the period 0.2 0.8 1.0
Disposal (0.7) - (0.7)
At 31 December 2024 0.6 3.5 4.1
Net book value
At 31 December 2024 0.4 8.9 9.3
Significant movement in other intangible assets
During 2024, Alfa developed new internally generated software at a cost of
£5.3m (2023: £2.8m). This software will be amortised over three to five
years.
The total research and product development expense for the period was £2.3m
(2023: £3.1m).
16. Property, plant and equipment
£m Fixtures and fittings IT equipment Total
Cost
At 1 January 2023 1.5 3.8 5.3
Additions 0.1 0.5 0.6
Disposals - (1.1) (1.1)
At 31 December 2023 1.6 3.2 4.8
Depreciation
At 1 January 2023 0.9 3.4 4.3
Charge for the 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
Cost
At 1 January 2024 1.6 3.2 4.8
Additions - 0.3 0.3
Disposals (0.1) (1.7) (1.8)
At 31 December 2024 1.5 1.8 3.3
Depreciation
At 1 January 2024 1.1 2.7 3.8
Charge for the year 0.2 0.4 0.6
Disposals (0.1) (1.7) (1.8)
At 31 December 2024 1.2 1.4 2.6
Net book value
At 31 December 2024 0.3 0.4 0.7
17. Right-of-use assets
£m Motor vehicles Property Total
Cost
At 1 January 2023 0.5 10.9 11.4
Additions 0.2 - 0.2
At 31 December 2023 0.7 10.9 11.6
Depreciation
At 1 January 2023 0.3 4.0 4.3
Charge for the 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
Cost
At 1 January 2024 0.7 10.9 11.6
Additions* 0.3 2.4 2.7
Disposals (0.3) - (0.3)
At 31 December 2024 0.7 13.3 14.0
Depreciation
At 1 January 2024 0.5 5.0 5.5
Charge for the year 0.1 1.0 1.1
Disposals (0.3) - (0.3)
At 31 December 2024 0.3 6.0 6.3
Net book value
At 31 December 2024 0.4 7.3 7.7
* Additions to property in the year relate primarily to the extension of the
lease (a lease modification) to the UK office at Moor Place, 1 Fore Street
Avenue, London, EC2Y 9DT, UK.
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 2024 2023
Depreciation (1.1) (1.2)
Interest expense (0.6) (0.4)
Short‑term lease expense - (0.1)
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 2024 2023
Balance as at 1 January 0.3 1.6
Effect of changes in tax rates - (0.1)
Deferred income taxes recognised in the consolidated statement of
profit or loss and comprehensive income (1.2) (0.7)
Deferred tax on share-based payments recognised in reserves 0.4 (0.5)
Balance as at 31 December (0.5) 0.3
Consisting of:
Depreciation in excess of capital allowances - (0.1)
Capital allowances in excess of depreciation 0.1 -
Other timing differences (0.6) 0.4
Balance as at 31 December (0.5) 0.3
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 £2.7m at 31 December 2024
(2023: £5.5m).
At the reporting date, the provision for deferred tax comprised net deferred
tax assets relating to overseas group companies of £0.5m (20023: £0.3m) and
net deferred tax liabilities relating to the UK of £(1.0)m (2023: nil). The
net deferred tax liabilities relating to the UK is comprised mainly of a
deferred tax liability in relation to accelerated tax deductions for
capitalised intangibles of £(2.3)m (2023: £(1.1)m) and a deferred tax
asset in relation to share options of £0.9m (2023: £0.6m).
19. Interests in joint venture
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. In
2023, the activity in the Alfa iQ joint venture ceased and the company was
placed into Members Voluntary Liquidation in 2024.
At 31 December 2024 and 31 December 2023 the investment is carried at £nil
and the loan is carried at £nil.
Investment
£m 2024 2023
Carrying amount as at 1 January - 0.1
Other movements - 0.1
Share of net loss from the joint venture - (0.2)
Carrying amount as at 31 December - -
Loan to joint venture
£m 2024 2023
Carrying amount as at 1 January - 0.1
Loan write off - (0.1)
Carrying amount as at 31 December - -
20. Trade receivables
£m 2024 2023
Trade receivables 8.6 5.6
Provision for impairment - -
Trade receivables - net 8.6 5.6
Ageing of trade receivables
Ageing of net trade receivables £m 2024 2023
Within agreed terms 8.1 5.0
Past due 1-30 days 0.5 0.6
Past due 31-90 days - -
Past due 91+ days - -
Trade receivables - net 8.6 5.6
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 2024 2023
GBP 3.0 2.6
USD 4.8 2.4
Other 0.8 0.6
Trade receivables - net 8.6 5.6
Trade receivables due from significant customers
There were no customers with revenue accounting for more than 10% of total
revenue in 2024 and 2023.
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 2024 2023
Accrued income 4.7 4.6
Prepayments 4.9 3.8
Corporation tax recoverable 2.8 1.9
Other receivables 0.3 0.3
Total other receivables held at amortised cost 12.7 10.6
Accrued income represents fees earned, but not invoiced, at the reporting
date, which have no right of offset with contract liabilities - deferred
licence amounts.
Prepayments include £1.0m of deferred costs in relation to costs to fulfil
contracts (2023: £1.3m). During the year £0.3m (2023: £0.2m) relating to
costs to fulfil contracts has been recognised within cost of sales.
Corporation tax recoverable at the reporting date of £2.8m (2023: £1.9m)
represents predominately UK tax of £2.3m (2023: £1.9m), due to be refunded
on the submission of (i) the R&D-related claims for 2023 and 2024 and (ii)
the 2024 corporation tax return. An additional amount of £0.4m (2023: £0.5m)
relates to RDEC recoverable.
22. Cash and cash equivalents
£m 2024 2023
Cash at bank and in hand 20.5 21.8
Cash and cash equivalents 20.5 21.8
Currency of cash and cash equivalents
£m 2024 2023
GBP 8.6 13.5
USD 6.1 3.4
AUD 2.1 1.8
EUR 2.5 2.2
Other 1.2 0.9
Cash and cash equivalents 20.5 21.8
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 2024 2023
Trade payables 1.0 0.5
Other payables 10.7 9.5
Contract liabilities - deferred licence and fees 8.1 8.0
Contract liabilities - deferred maintenance 7.6 6.2
Deferred tax liability 1.0 -
Lease liabilities (note 24) 9.3 8.2
Provisions for other liabilities (note 25) 0.8 0.7
Total current and non-current liabilities 38.5 33.1
Less non-current portion (11.0) (7.5)
Total current liabilities 27.5 25.6
Other payables includes amounts relating to other tax and social security of
£3.3m (2023: £2.0m). Of the remainder, £5.8m (2023: £5.4m) 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 2023 to the amount disclosed at 31 December 2024:
£m Total
Lease liabilities recognised at 1 January 2023 9.3
Additions 0.2
Interest charge 0.4
Payments made on lease liabilities (1.7)
At 31 December 2023 8.2
Additions 2.4
Interest charge 0.6
Payments made on lease liabilities (1.9)
At 31 December 2024 9.3
Additions to lease liabilities include extensions to existing lease
agreements. In 2024 there was an extension of the lease (a lease
modification) to the UK office at Moor Place, 1 Fore Street Avenue, London,
EC2Y 9DT, UK.
Total lease payments in 2024 were £1.9m (2023: £1.8m).
Below is the maturity analysis of the lease liabilities:
£m 2024 2023
Non-current 9.2 6.8
Current 0.1 1.4
Total lease liabilities 9.3 8.2
No later than one year 0.8 1.7
Between one year and five years 6.6 6.2
Later than five years 6.0 1.4
Total future lease payments 13.4 9.3
Total future interest payments (4.1) (1.1)
Total lease liabilities 9.3 8.2
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 2023 0.9
Provided in the period 0.2
Utilised in the period (0.4)
Released in the period -
At 31 December 2023 0.7
Provided in the period 0.4
Utilised in the period (0.3)
Released in the period -
At 31 December 2024 0.8
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 2035 and £0.5m over various years.
26. Share capital
2024 2023
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 2024 or 2023.
27. Translation reserve
£m 2024 2023
At 1 January 0.2 0.4
Currency translation of subsidiaries (0.1) (0.2)
At 31 December 0.1 0.2
28. Own shares
£m 2024 2023
Balance at 1 January 8.7 7.5
Acquired in the year 0.7 4.8
Distributed on exercise of options (1.5) (3.6)
Balance at 31 December 7.9 8.7
The own shares reserve represents the cost of shares in Alfa Financial
Software Holdings PLC that have been:
· Purchased in the market and held by the Group's EBT to satisfy options
under the Group's share options plans. The number of shares held as at 31
December 2024 was 83,904 (31 December 2023: 721,036); and
· Purchased in the market and held by the Group as a result of the share
buy-back programme that was launched on 18 January 2022 and ended on 30 June
2023. The number of shares held at 31 December 2024 was 4,775,119
(31 December 2023: 4,775,119).
Own shares distributed relates to shares distributed to employees from the EBT
for bonus awards under share schemes. As at 31 December 2024, the Group held
1.62% (31 December 2023: 1.84%) of its own called-up share capital.
29. Share awards
The Group recognised total expenses relating to share-based payment of £1.4m
(2023: £1.6m) in the current year. Of this, £1.1m (2023: £1.3m) relates to
equity-settled LTIP schemes and £0.3m (2023: £0.3m) 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 price Share options Share
31 December 2024
options 31 December 2023
April 2021 Service and Performance LTIP April 2024 0p - 1,070,668
November 2021 Service Only LTIP October 2024 0p - 60,872
November 2021 Service Only UK Employee ShareSave January 2025 153.6p 168,146 172,832
November 2021 Service Only US Employee ShareSave January 2024 167.0p - 40,323
April 2022 Service and Performance LTIP April 2025 0p 741,162 741,162
April 2022 Service Only LTIP April 2025 0p 231,290 237,965
April 2022 Service Only US Employee ShareSave June 2024 141.1p - 27,727
May 2022 Service Only UK Employee ShareSave June 2025 132.8p 211,673 214,383
September 2022 Service Only LTIP September 2025 0p 5,917 5,917
April 2023 Service and Performance LTIP April 2026 0p 913,963 913,963
April 2023 Service Only LTIP April 2026 0p 374,948 383,814
April 2023 Service Only UK Employee ShareSave June 2026 109.6p 841,071 857,493
April 2023 Service Only US Employee ShareSave June 2025 116.5p 54,960 54,960
April 2024 Service and Performance LTIP April 2027 0p 720,024 -
April 2024 Service Only LTIP April 2027 0p 342,774 -
April 2024 Service Only US Employee ShareSave June 2026 146.0p 30,274 -
May 2024 Service Only UK Employee ShareSave June 2027 137.4p 194,657 -
September 2024 Service Only LTIP September 2027 0p 3,164 -
The weighted average share price at the date of exercise for share options
exercised during the period was 177.4 pence (2023: 161.7 pence). The options
outstanding at 31 December 2024 had a weighted average exercise price of 38.0
pence (2023: 34.7 pence), and a weighted average remaining contractual life
of 1.5 years (2023: 1.5 years).
The opening weighted average exercise price at 1 January 2024 was 34.7 pence
(1 January 2023: 27.1 pence). The weighted average exercise price of options
forfeited and exercised during the year was 146.5 pence (31 December 2023:
161.2 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 is 24.1
pence (2023: 45.4 pence).
The total share-based payment charge relating to Alfa Financial Software
Holdings PLC shares for the year is split as follows:
£m 2024 2023
Employee share schemes - value of services 1.1 1.5
Expense in relation to fair value of social security liability on employee 0.3 0.1
share schemes
Total cost of employee share schemes 1.4 1.6
Details of the share options outstanding during the year are as follows:
2024 2023
Outstanding at 1 January 4,782,079 5,473,851
Conditionally awarded in year 1,290,893 2,210,230
Exercised (977,712) (2,322,473)
Forfeited or expired in year (261,237) (579,529)
Outstanding at 31 December 4,834,023 4,782,079
Exercisable at the end of the year - -
29.1 LTIPs
The 2021 April and 2021 November LTIP awards vested during the year. The
exercise of these awards had a net impact of £0.8m on own shares and £1.5m
on retained earnings.
The 2022 April and 2023 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. An estimate is made for the awards
which are linked to EPS based on the expectation of achievement of EPS
conditions at the end of each accounting period.
The 2022 April LTIP awards, the 2022 September LTIP awards and the 2023 April
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 2024 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 Monte Carlo valuation
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 discounted by the expected dividend yield to reflect
the lack of dividend accrual over the vesting period. An estimate is made for
the awards which are linked to EPS based on the expectation of achievement of
EPS conditions at the end of each accounting period. The following table lists
the inputs to the model used for the awards granted in the year ended 31
December 2024 based on information at the date of grant:
LTIP awards (granted in April) TSR element EPS element
Share price at date of grant 171.2p 171.2p
Award price 0p 0p
Volatility 44.0% -
Embedded TSR 12.5% -
Average correlation 15.1% -
Life of award 3 years 3 years
Risk-free rate 4.00% -
Fair value per award 100.7p 151.6p
In April 2024, the Group awarded to certain employees an LTIP conditional on
employment only. The fair value of these awards on the date of grant is 151.6
pence, discounted by the expected 12-month dividend yield to reflect the lack
of dividend accrual over the vesting period (three years).
In September 2024, the Group awarded to certain employees an LTIP conditional
on employment only. Given the small number of share options awarded in these
awards, the fair value of these awards on the date of grant was assumed to be
the same as that for the April 2024 awards mentioned above, i.e. 151.6 pence.
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 2024
SAYE ESPP
Number of Exercise Number of Exercise
share options
price
share options
price
Outstanding at beginning of year 1,244,708 119.7p 123,010 138.6p
Conditionally awarded in year 194,657 137.4p 30,274 146.0p
Exercised during the year - - (25,118) 141.1p
Forfeited or expired in year (23,818) 120.9p (42,932) 142.7p
Outstanding at the end of the year(*) 1,415,547 122.1p 85,234 127.0p
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 2024
31 December 2024
Share price 171.2p 171.2p
Exercise price 137.4p 146.0p
Expected volatility 44.5% 42.6%
Expected life 36 months 24 months
Risk-free rate 4.13% 4.10%
Expected dividend yields 4.0% 4.0%
Fair value per award 57.3p 48.5p
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 special dividend of 2.0 pence per share was paid on 30 May 2024 amounting to
£5.9m (2023: £4.4m at 1.5 pence per share).
A ordinary dividend of 1.3 pence per share was paid on 27 June 2024 amounting
to £3.8m (2023: £3.5m at 1.2 pence per share).
A special dividend of 4.2 pence per share was paid on 8 November 2024
amounting to £12.4m (2023: £11.8m at 4.0 pence per share).
Subject to approval at the AGM on 30 April 2025, a 2024 final dividend of 1.4
pence per share will be paid on 27 June 2025 to holders on the register on 30
May 2025. The ordinary shares will be quoted ex-dividend on 29 May 2025. In
addition, the Board has decided to declare a special dividend of 2.4 pence per
share, with an ex-dividend date of 1 May 2025, a record date of 2 May 2025 and
a payment date of 30 May 2025.
32. Related parties
32.1 Controlling shareholder
The ultimate parent undertaking as at 31 December 2024 was CHP Software and
Consulting Holdings Limited (the 'ultimate parent'), being the parent
undertaking of the smallest and largest group in relation to these
consolidated financial statements. At 31 December 2023 the immediate and
ultimate parent undertaking was CHP Software and Consulting Limited. The
change in the year was due to an internal reorganisation within the CHP group.
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 activity Held by Company 2024 Held by Group 2024 Held by Company 2023 Held by Group 2023
Alfa Financial Software Group Limited Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Holding company 100% 100% 100% 100%
Alfa Financial Software Limited Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Software and services - 100% - 100%
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, Services - 100% - 100%
New Zealand
Alfa Financial Software GmbH Bockenheimer Landstraße. 20, 60323 Frankfurt am Main, Germany Software and services - 100% - 100%
Alfa Financial Software International Limited Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Software and services - 100% - 100%
Alfa AI Limited Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, UK Services - 100% - 100%
Alfa iQ Limited* 30 Finsbury Square, London, EC2A 1AG, UK Software and services - 51% - 51%
* The activity in the Alfa iQ joint venture ceased in late 2023 and the
company was placed into Members Voluntary Liquidation in 2024. The registered
address prior to the liquidation was Moor Place, 1 Fore Street Avenue, London,
EC2Y 9DT, UK.
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 £12.4m were paid to the ultimate parent (2023:
£11.8m).
Dividends of 2.0 pence, 1.3 pence and 4.2 pence per share were paid to all
shareholders in 2024 (2023: 1.5 pence, 1.2 pence and 4.0 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. In
2023, the activity in the Alfa IQ joint venture ceased and the company was
placed into Members Voluntary Liquidation in 2024. Therefore, at 31 December
2024 the investment is carried at £nil (2023: £nil) and the loan is carried
at £nil (2023: £nil).
In 2024 Alfa Financial Software Limited paid expenses of £0.1m on behalf of
Alfa iQ Limited. In 2023, Alfa Financial Software Limited paid expenses of
£0.1m on behalf of Alfa iQ Limited and these were fully recharged back to
Alfa iQ Limited at no mark up.
In 2024, expenses relating to property of £0.02m (2023: £0.04m) were paid on
behalf of the ultimate parent and these were fully recharged back to the
ultimate parent at no mark up.
In 2023, two debentures were sold to the ultimate parent for £0.2m. The
transaction was at arm's length. No such transaction took place in 2024.
The balances outstanding from the ultimate parent at 31 December 2024 and 2023
were £nil and £nil respectively.
There were no other outstanding 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 2024 and 31 December 2023 in the consolidated
statement of financial position.
31 December 2024 Gross Amounts Net amounts presented
£m
amounts
offset
Accrued income 5.1 (0.4) 4.7
Contract liabilities - deferred licence (8.5) 0.4 (8.1)
31 December 2023 Gross Amounts Net amounts
£m
amounts
offset
presented
Accrued income 5.5 (0.9) 4.6
Contract liabilities - deferred licence (8.9) 0.9 (8.0)
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 2024.
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 2024, 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
12 March 2025
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