REG - Alfa Financial Soft - Full Year Results for year ended 31 December 2025
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RNS Number : 3077W Alfa Financial Software Hldgs PLC 12 March 2026
12 March 2026
Alfa Financial Software Holdings PLC
Full Year Results for the year ended 31 December 2025
Excellent delivery and financial performance with fast growing subscription
revenues
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 2025 ("the period").
Financial highlights:
l Revenue up 15% at £126.7m (2024: £109.9m) driven by strong Subscription
revenues growth of 16% and Delivery momentum
l NRR of 109% (2024: 103%)
l Operating profit up 17% to £40.1m (2024: £34.3m) at 31.6% operating margin
(2024: 31.2%)
l Profit Before Tax up 18% at £40.1m (2024: £34.1m)
l TCV of £227.5m up 3% (2024: £221.3m) due to strong growth in Subscription
TCV
l Continued strong cash generation with 97% free cash flow conversion
l Robust balance sheet position with £26.4m of cash and no bank debt
l Ordinary dividend increased and special dividend declared, reflecting
confidence in the future
Financial summary
Results
Years ended 31 December Movement
£m, unless otherwise stated 2025 2024 %
Revenue 126.7 109.9 15%
Operating profit 40.1 34.3 17%
Profit before tax 40.1 34.1 18%
Earnings per share - basic (p) 10.19 8.68 17%
Earnings per share - diluted (p) 10.14 8.56 18%
Special dividend declared per share (p) 3.1 2.4 29%
Proposed ordinary dividend (p) 1.5 1.4 7%
£m 2025 2024 Movement %
Cash 26.4 20.5 29%
Key measures ((1)) 2025 2024 Movement
£m, unless otherwise stated %
Revenue - constant currency 126.7 108.3 17%
Cash generated from operations 44.5 37.3 19%
Operating free cash flow conversion (%) 97% 89% 8%
Total Contract Value (TCV) 227.5 221.3 3%
((1) See definitions section for further information regarding calculation of
measures not defined by IFRS.)
( )
Strategic highlights:
Growing SaaS Subscription revenues
l 16% growth in Subscription revenues, fastest growing revenue stream
l 18% growth in Subscription TCV versus last year end
l ARR of £43.9m up 15% on last year
l NRR of 109% boosted by new customers Subscription revenues increasing through
the implementation phase
l Alfa Cloud customers now total 22 (2024: 21)
Strong sales and Delivery momentum
l Strong late-stage pipeline, with 10 prospects at year end
l 5 out of 10 customers in late-stage pipeline are working under letters of
engagement
l 35 go‑lives demonstrating strong delivery execution, with 20 customers now
on Alfa Systems 6
Sustained investment in product, people, planet
l Further development of our software with £37.7m investment in product (2024:
£37.1m) improving our competitive leadership and market position
l Particular focus on additional functionality in US Auto Originations, Fleet
and Commercial Finance, which will increase both our Serviceable (SAM) and
Target Addressable Markets (TAM)
l Average headcount of 516 up 6% versus 2024 with high staff retention (97%)
Outlook
We continue to maintain a very healthy sales pipeline and are encouraged by
the activity in the earlier stages of the pipeline. For 2026 we expect strong
Subscription revenue growth and good Delivery revenue growth. Over recent
years we have been very successful in growing our US business so that it now
accounts for 45% of our revenues, which at current exchange rates creates a
headwind for growth in our reported results. Overall, despite the impact of
currency headwinds and wider macro uncertainty, we expect to see good revenue
growth in 2026 and beyond.
Andrew Denton, Chief Executive Officer
"In 2025 we delivered exceptional operational performance along with a very
strong financial performance generating 17% constant currency revenue growth
and a 32% operating profit margin, meaning our target of "Rule of 40" was well
and truly beaten. It also was a year of strong strategic progress with
Subscription revenues up 16%.
Over the years we have made deliberate and considered technical architecture
decisions so that we have a pure cloud-native product that is robust at
volume, yet flexible enough to continue to benefit from integrating or
interfacing with the latest technologies, including AI. This is not only
driving improvements and innovation for our customers it is allowing us to
increase our addressable markets and expand our competitive advantage.
We have continued to focus on maintaining the strength of the Alfa culture,
evidenced by our very high employee retention and engagement scores. The
strength of our culture along with the proven success of our strategy, the
quality of our people and our product, and our very healthy pipeline mean 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
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
Teneo +44 (0)20 7353 4200
James Macey White
Matt Low
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 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.
Forward-looking statements
This Full Year Report ("FYR") has been prepared solely to provide additional
information to shareholders to assess the Group's strategies and the potential
for those strategies to succeed. The FYR should not be relied on by any
other party or for any other purpose. This report contains certain
forward-looking statements. All statements other than statements of
historical fact are forward-looking statements. These include statements
regarding Alfa's intentions, beliefs or current expectations, and those of our
officers, directors and employees, concerning (without limitation), with
respect to the financial condition, results of operations, liquidity,
prospects, growth, strategies and businesses of Alfa. These statements and
forecasts involve known and unknown risks, uncertainty and assumptions because
they relate to events and depend upon circumstances that will or may occur in
the future and should therefore be treated with caution. There are a number
of factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. These forward-looking statements are made only as at the date of
this announcement. Nothing in this announcement should be construed as a
profit forecast. Except as required by applicable law, Alfa disclaims any
obligation or undertaking to update the forward-looking statements or to
correct any inaccuracies therein, or to keep current any other information
contained in the FYR. Accordingly, reliance should not be placed on any
forward-looking statements.
BUSINESS REVIEW
Strong strategic progress
Alfa is an enterprise software and delivery company. Our strategy for creating
long-term, sustainable business value is to:
l Strengthen - grow our differentiation of market leading people, product and
delivery
l Scale - increase our capacity for developing and delivering Alfa Systems and
extend our reach
l Sell - enable profitable growth by focusing on Alfa Cloud, Subscription
revenues and incremental sales in our chosen markets
l Simplify - enable more concurrent implementations, more efficiently by
simplifying our product, delivery and processes and utilising Alfa Start
In 2025 we continued to make significant strategic progress, at the same time
as delivering strong results.
l Subscription growth - our strong sequential growth in Subscription revenues
has continued
l Product development - continued progress particularly in the areas of US Auto
Originations, Commercial Finance and Fleet, increasing the Target and
Serviceable Addressable Markets
l Delivering Alfa Systems 6 ("AS6") - we have shown the frictionless upgrade
nature of AS6 for our customers, with 20 of them now live
l Incremental sales - we have streamlined the process of module launches thereby
enabling growth in incremental sales
In 2025 we continued to increase our functional lead over our competition with
further releases of Alfa Systems 6 and developing new modules to cover US Auto
Originations, Fleet and Commercial Finance.
We have continued to grow the Company and have increased our access to talent
pools by establishing a smart hub in Poland while maintaining the extremely
strong Alfa culture.
Our diversification across end markets and customers means that our top five
customers now account for 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 2025 with 35 delivery events in the year.
Our customer retention is extremely high. Since the cloud-native version of
Alfa Systems was launched in 2010, no customer has ever moved off an
implemented modern version of Alfa onto a rival system.
AI and Alfa - Focused, Practical and Value creating
Alfa views AI as an enabler of greater efficiency and customer value rather
than a disruptor of its business model. Our approach is deliberately pragmatic
and grounded in real use‑cases that enhance productivity, delivery
efficiency and product capability.
We focus our AI strategy on four areas:
1. AI literacy across the organisation, ensuring our people can responsibly
and effectively leverage new tools.
2. Internal efficiencies, using AI to streamline processes, reduce manual
effort and improve operational scalability, including in software development.
3. Delivery acceleration, applying AI to reduce implementation costs and
timelines for customers.
4. Product enhancements, embedding AI where it solves specific customer
challenges and improves automation, insight and decision‑support.
Alfa's business model and product architecture provide a strong foundation for
long‑term AI resilience and Alfa is well placed to benefit from advances in
AI technology:
l Deep functional domain capability makes replication of Alfa Systems by generic
AI models impractical.
l Contract‑volume‑based pricing, rather than per‑user models, ensure
AI‑driven headcount reductions at customers will not impact Alfa's revenues.
l Advances in the use of generic AI automation tooling will be predicated on and
governed by our enterprise software:
¡ Alfa provides a vast, well-structured data framework that is based on a deep
understanding of the complex enterprise context in which we operate. Our
deeply embedded, enterprise-wide software provides encoded institutional
knowledge and system of record. Alfa Systems serves customers' line of
business in an extremely complex market.
¡ Our regulated customer base requires embedded, deterministic workflow and
ledger transactions with clear audit trails and predictable interactions
within a complex landscape. This does not favour ungoverned AI outputs acting
alone. In this context standardisation, compliance, reliability,
reversibility, integration, speed, authority models, security and specific
industry practice matter much more than generic automation.
l Enterprise software implementation projects within highly complex and
regulated environments are necessarily huge business change exercises. We see
AI increasing implementation efficiency, but not eliminating the process. At
Alfa we have an unrivalled track record of delivery of these projects in
intricate and interconnected contexts and where competitors consistently
struggle. This is a key aspect of our differentiation.
l Alfa's market-leading technology stack and architecture, alongside an
expansive and culturally embedded innovation agenda ensure that Alfa Systems
is well positioned to maximise the potential of AI technology as it evolves.
Strong growth driven by fast growing Subscription revenues
Financial performance was strong with continued growth in revenue and profit.
Revenue was up 15% to £126.7m (2024: £109.9m) at actual exchange rates or up
17% at constant currency rates.
Subscription revenues continued to grow strongly, up 16% year on year, driven
by growth from existing customers along with new customers. In 2025 we started
to see strong growth in Subscription revenues from customers won in 2024.
Delivery revenues were up 15% to £63.5m (2024: £55.0m), with growth in 2025
accelerating from 2024 as the implementation of new projects we won in Q4 2024
ramped up.
Software Engineering revenue growth overall was up 13% versus 2024 finishing
the year at £19.6m (2024: £17.4m), but with a very different phasing than
last year. This year revenue was stronger in H1 than H2, due to stronger
demand for customer-led development, which was the opposite of 2024. Software
Engineering revenues are dependent on the stage of implementation work and
the maturity of the product in the markets it is being implemented into.
We delivered strong growth in operating profit, increasing 17% to £40.1m
(2024: £34.3m) on the back of the 15% growth in revenues at a gross margin of
63.7% (2024: 64.5%). Slower growth in SG&A resulted in an improved
operating margin of 31.6% (2024: 31.2%). Cash conversion in the year was 97%
(2024: 89%) at the upper end of our expected range of 90% - 100%. We finished
the period with cash of £26.4m (31 Dec 2024: £20.5m) and no borrowings.
Excellent level of TCV supporting future growth
Our definition of a "win" and consequently the stage at which projects are
included in TCV is only once full contract packs are signed. Sometimes
contract packs are signed before we start work with a new customer, sometimes
they are negotiated as implementation is underway and in extremis they may
only be signed shortly before go-live. Customer preference can therefore
impact the number of wins in any one year and therefore impact the level of
TCV.
During 2025 we signed contract packs with one customer, but we were working
with - and being paid by - five out of the ten customers in the late-stage
pipeline. Overall TCV of £227.5m was up 3% versus last year (2024: £221.3m)
with particularly strong growth in our Subscription TCV. Demand for chargeable
Software Engineering development can vary depending on the mix of business we
are implementing at any point in time. In FY26 we expect a greater proportion
of implementations to follow a simpler deployment pattern with less bespoke
requirements, which reduces chargeable development but typically accelerates
time to full Subscription run rate.
Our top five customer concentration has significantly reduced to 33% of our
revenues in 2025, compared with 61% in 2019. Our largest customer represented
9% of our revenues in 2025. The stickiness of our customers on our modern
software is demonstrated by NRR of 109% (2024: 103%) and the fact that since
we went live in 2010 with version 5 of our software we have only lost two
customers after go-live, one was bought by another Alfa customer and the other
exited asset finance.
Delivery and Software Engineering agility
2025 was a busy year for Delivery with 35 go-live events. At the end of 2025
we had 20 customers on Alfa Systems 6. We continue to focus on simplifying and
increasing the speed of our implementations so that we can deliver more
concurrent implementations and Alfa Cloud is a key factor in facilitating
smooth go-lives. To service this growing customer base and to ensure that we
have a model that can scale with this growth we have opened a smart hub in
Poland. While the initial focus for recruitment here is to support the growth
in Cloud operations, we may also use it to find additional talent for Software
Engineering and Delivery.
The progress we have made with our simplification objective now enables us to
have one team support multiple customers. We have established Central Delivery
Teams in the UK and USA and these have grown in importance as part of our
overall support to clients. For example, in EMEA we have nearly doubled the
number of people in the team, they now support 13 clients and delivered eight
of the upgrades in the year. This has halved the average age of client
versions, providing a better service to the clients and at the same time
making it easier for us to maintain.
A key lever in simplifying our implementations is Alfa Start both as a
complete package but also as an accelerator for more complex implementations.
In 2025 we continued to invest across UK Equipment, US Auto, US Equipment and
APAC Start. In 2026 we will also invest into Euro Start with an initial focus
on Germany as we see this as a market of growing strategic importance for us.
Investment in software
We continue to invest to maintain and increase our technology leadership in
the market. We invested £37.7m into the further development of our software
in 2025 (2024: £37.1m). Our investment was focused on US Auto Originations,
Fleet and Commercial Finance. These will increase both the proportion of our
market that we can access as well as the size of our total addressable market.
We made good progress and benefited from working closely with customers in all
three areas, which is our preferred way of making investments, as it ensures
that we create software that is a great fit for the market as a whole.
Fleet and US Auto Originations functionality allows us to immediately access
an additional part of our existing Target Addressable Market in asset finance,
increasing the Serviceable Addressable Market.
The Commercial Finance market is something we have been developing for a while
and investment in this area will continue into next year and beyond. Our
initial focus is to work with customers in the asset finance market who have
Commercial Finance offerings and we have seen keen interest in exploring our
new syndications functionality. In the longer term, this will open up a
brand-new addressable market of stand-alone Commercial Finance customers,
meaningfully increasing our Target Addressable Market.
We will continue to invest in all three areas in 2026 along with improving our
Point of Sale and Portal capability along with investing in Architecture to
simplify the process for expanding the use of AI by Alfa Systems customers to
truly embed AI as part of our SaaS solution.
Headcount growth, supported by strong retention
To deliver the growth in the business we continued to recruit both graduates
and experienced hires in 2025, with the biggest increase in the US, where
average headcount was up 20% compared with 2024. Headcount in the UK has
increased 38% over the last two years. The success in focusing on maintaining
our culture across the business can be seen from continued high retention
rates of 97% (2024: 96%). The combination of our recruitment and high
retention has resulted in headcount at the end of the year being up 5% at 527
(2024: 502) with average headcount in the period of 516 (2024: 485) up 6% on
last year.
Capital return
We remain a highly cash-generative business, with cash conversion of 97% in
2025 (2024: 89%). We expect cash conversion to average 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 £26.0m excess cash to shareholders during the
year through ordinary and special dividends, an increase of £3.9m on 2024, we
ended the year with cash increasing by £5.9m to £26.4m. As such, the Board
has today proposed an ordinary dividend of 1.5 pence per share, up 7%, with an
ex-dividend date of 28 May 2026, a record date of 29 May 2026 and a payment
date of 26 June 2026. The ordinary dividend would amount to a total payment of
c.£4.4m. In addition, the Board has decided to declare a special dividend of
3.1 pence per share, up 29% on the special dividend declared this time last
year, with an ex-dividend date of 30 April 2026, a record date of 1 May 2026
and a payment date of 29 May 2026. The special dividend would amount to a
total payment of c.£9.2m.
Stable market conditions
We have seen over the last few years that despite a difficult and at times
volatile macro-economic environment the asset finance market and demand for
software within it has remained robust.
With regards to winning future customers, we benefit by not being dependent on
any one particular market. Alfa Systems is operational in 37 countries; in
automotive finance, equipment finance and wholesale and loan finance; for
OEMs, banks and independents and across all asset classes. This breadth and
diversity has helped insulate us from any underlying economic uncertainty in
any individual market.
The market itself is relatively robust and our software once installed with
customers is even more resilient to changes as it is mission critical for our
customers' businesses - in effect being heart and lungs software which cannot
be easily replaced.
Strong pipeline
At the end of the year our late-stage pipeline remains strong with 10
prospects, up from eight at the start of 2025. We are the preferred supplier
with eight of these and have started working under letters of engagement with
five. The pipeline includes a good balance across all regions with four in
EMEA (including UK), with three each in the Americas and AsiaPac. There is
also a good spread across Auto and Equipment and between OEM and banks.
2025 continued the trend of macro uncertainty but our pipeline remained strong
and we continue to see good levels of activity in the early-stage pipeline,
showing that the buying dynamics of the market remain largely unchanged.
We remain confident in both the demand for our best-in-class software and our
ability to win work in the market.
Sustainability
We remain committed to our sustainability activities and this was recognised
by winning the Corporate Social Award at the Asset Finance Connect Summer
Awards and our inclusion in the FTSE4Good Index. We have provided work
experience for a social mobility charity, social talks and events, and
fund-raising activities which were driven by the energy and enthusiasm of our
Alfa Communities.
We also have invested in improving the accessibility of Alfa Systems,
particularly for those using screen readers. This involved automated testing
but also a lot of manual testing and judgement to gauge how understandable the
screens are. Great progress has been made in 2025 but there is more work to be
done to ensure all parts of the system are at the level we want.
Outlook
We continue to maintain a very healthy sales pipeline and are encouraged by
the activity in the earlier stages of the pipeline. For 2026 we expect strong
Subscription revenue growth and good Delivery revenue growth. Over recent
years we have been very successful in growing our US business so that it now
accounts for 45% of our revenues, which at current exchange rates creates a
headwind for growth in our reported results. Overall however, despite the
impact of currency headwinds and wider macro uncertainty, we expect to see
good revenue growth in 2026 and beyond.
FINANCIAL REVIEW
Financial results
2025 2024 Movement
£m %
Revenue 126.7 109.9 15%
Gross profit 80.7 70.9 14%
Operating profit 40.1 34.3 17%
Profit before tax 40.1 34.1 18%
Taxation (10.0) (8.5) 18%
Profit for the period 30.1 25.6 18%
Basic EPS 10.19p 8.68p 17%
Diluted EPS 10.14p 8.56p 18%
Revenues increased by 15% or £16.8m to £126.7m in the 12 months ended 31
December 2025 (2024: £109.9m), with growth at constant currency stronger at
17%. Revenues grew very strongly in the Americas, up 23% on the back of some
large customer wins over the last 18 months, and now account for 45% (2024:
42%) of revenues.
Gross profit increased to £80.7m (2024: £70.9m) up £9.8m, with gross margin
at 63.7% (2024: 64.5%) with the decrease in gross margin due to software
capitalisation of £5.0m (2024: £5.3m) remaining in line with last year and
so dropping as a percentage of revenue.
Sales, General & Admin expenses increased to £41.0m (2024: £36.6m)
largely due to increased headcount and salary increases along with increased
profit share payout resulting from increased profits. Gains on foreign
exchange forward contracts of £1.5m (2024: £0.3m gain) partially offset
this.
Overall operating profit increased by 17% to £40.1m (2024: £34.3m) with
profit before tax of £40.1m (2024: £34.1m).
The Effective Tax Rate ("ETR") for 2025 was 24.9% (2024: 24.9%) in line with
last year. Profit for the period was £30.1m (2024: £25.6m).
Revenue
Revenue - by type Movement
£m 2025 2024 %
Subscription 43.6 37.5 16%
Software Engineering 19.6 17.4 13%
Delivery 63.5 55.0 15%
Total revenue 126.7 109.9 15%
Subscription - Continuing strong growth in Subscription revenues
Subscription revenues arise from revenues from SaaS and other recurring
services
Overall Subscription revenues increased strongly by 16% to £43.6m (2024:
£37.5m) with the strongest growth arising from new customers not yet live
along with growth from existing customers. Subscription customers now total 42
(2024: 39) of which 22 are on Alfa Cloud, 15 are on their own private cloud, 2
are on v4 of Alfa and 3 are in the late-stage pipeline. Of the 22 customers on
Alfa Cloud, 6 are not yet live as they are currently in implementation.
Subscription revenues account for 34% of overall revenues (2024: 34%)
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 - as expected a reduction in chargeable work in H2
following very strong H1
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 13%. In 2025 the
biggest growth came from chargeable development revenue from new customers up
£2.8m to £8.7m (2024: £5.9m). Following the transition to SaaS only sales,
perpetual customised licence recognition is now a relatively small part of our
business, with revenue of £2.8m in the period (2024: £3.3m). There were
one-off licence revenues of £0.9m (2024: £0.8m).
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 - Continuing strong delivery execution
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.
We entered the year with a record level of TCV, and with the new
implementation projects getting underway we saw strong growth in Delivery
revenues up 15% to £63.5m (2024: £55.0m). This growth was driven by the 11
new customers in implementation not yet live where revenues were up £11.5m to
£27.8m (2024: 16.3m). These projects are multi-year projects with go-lives in
subsequent years and as customers progress from paid pipeline work through
definition and into implementation, Delivery revenues increase.
Total revenues from existing customers, including V4 to V5/AS6 upgrades was
£35.7m (2024: £38.7m). Revenue from V4 to V5/AS6 upgrades was £9.6m
(2024: £6.4m). As V4 to V5/AS6 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 35 delivery events in the year which was significantly up on the 26
delivered in 2024 and matched the record 35 delivered in 2023. Customers
continued to upgrade onto AS6 and by the end of 2025 there were 20 customers
on AS6. There were three go-lives during the year. In September there was an
important v4 to AS6 go-live in the Nordics for a European Equipment OEM who we
hope to further roll out Alfa into new territories in the coming years. In
October an existing Australian client opened their doors to a brand new
business in New Zealand in under 10 months from starting definition work. This
rapid implementation was only possible by using our new APAC Start
accelerator. In December we went live with a UK Bank, using UK Equipment Start
as an accelerator, although there are further phases before it will have the
full run rate of contracts loaded.
In 2025 staff augmentation partners accounted for 8% (2024: 8%) of the
chargeable days delivered to clients. During 2025 we worked on our US Auto
Start product using the knowledge gained from existing US auto projects, with
an aim of targeting the Tier 3 US Auto Finance market with PLD.
Total Contract Value (TCV)
TCV - by stream Movement
£m 2025 2024 %
Subscription 161.5 136.7 18%
Software Engineering 14.2 24.6 (42)%
Delivery 51.8 60.0 (14)%
Total TCV 227.5 221.3 3%
Total contract value (TCV) at 31 December 2025 was £227.5m (31 December 2024:
£221.3m). There was strong growth in Subscription TCV which grew as
Subscription revenues from customers in implementation started to increase.
Software Engineering and Delivery TCV were down, as a lot of the new projects
in implementation have worked through their backlog. As contracts get
converted out of the late-stage pipeline we will see increases in Delivery
TCV, although the nature of the projects mean that we are not expecting a
significant increase in the Software Engineering TCV.
TCV - by stream for next 12 months Movement
£m 2025 2024 %
Subscription 49.5 41.9 18%
Software Engineering 8.8 13.5 (35)%
Delivery 39.9 40.3 (1)%
Total TCV 98.2 95.7 3%
Of the TCV at 31 December 2025, £98.2m (2024: £95.7m) is currently
anticipated to convert into revenue within the next 12 months. The
Subscription portion increased 18% to £49.5m (2024: £41.9m). Software
Engineering TCV, was down 35% to £8.8m (2024: £13.5m) and Delivery TCV
slightly down 1% to £39.9m (2024: £40.3m). As noted above as new contracts
convert from the late-stage pipeline we expect the Delivery TCV to increase.
Operating profit
The Group's operating profit increased by £5.8m to £40.1m in 2025 (2024:
£34.3m) reflecting the £16.8m increase in revenue offset by cost increases
of £11.0m.
Headcount numbers were up 5% at 31 December 2025 at 527 (2024: 502), with
average headcount of 516 up 6% on last year (2024: 485). Staff retention
remained very high at 97%.
Expenses - net Movement
£m 2025 2024 %
Cost of sales 46.0 39.0 18%
Sales, general and administrative expenses 41.0 36.6 12%
Other income (0.4) 0.0 -
Total expenses - net 86.6 75.6 15%
Cost of sales increased by £7.0m to £46.0m (2024: £39.0m) 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.
Capitalised investment into the product remained in line with last year.
Sales, general and administrative (SG&A) increased to £41.0m in the year
(2024: £36.6m). Salary costs were up 9% in the period to £15.7m (2024:
£14.4m). Profit Share Pay, including employer's costs, in the period was
£5.0m (2024: £4.2m). Share-based payment charges increased from last year to
£1.9m (2024: £1.4m). Depreciation and amortisation increased to £3.3m
(2024: £2.7m) as a result of increased intangible asset amortisation. Gains
on forward currency contracts increased to £1.5m (2024: £0.3m). Other
foreign currency gains/losses were a loss of £0.7m (2024: £0.2m gain). Other
costs totalling £15.9m increased 10% on last year (2024: £14.4m) with
employee benefits, principally healthcare costs, up 25% along with smaller
increases elsewhere as a result of the growth in the business.
Other income increased from £0.0m last year to £0.4m this year due to
increases in UK R&D Expenditure credit (RDEC).
Profit before tax
Overall profit before tax of £40.1m was up 18% on last year (2024: £34.1m).
Net finance costs were £nil (2024: £0.2m).
Profit for the period
Profit after taxation increased by £4.5m, or 18%, to £30.1m (2024:
£25.6m). The Effective Tax Rate for 2025 remained at 24.9% (2024: 24.9%).
Earnings per share
Basic earnings per share increased by 17% to 10.19 pence (2024: 8.68 pence).
Diluted earnings per share increased by 18% to 10.14 pence (2024: 8.56 pence).
Cash flow
Cash generated from operations was up to £44.5m (2024: £37.3m) with the key
factor being a very strong receivables performance, which reduced slightly
from last year end despite increased revenues. Net cash generated from
operating activities was £37.2m (2024: £28.4m) with tax payments of £6.6m
down on the £8.2m for 2024 largely due to the recovery of Corporate Tax
receivable from last year.
Cash (including the effect of exchange rate changes) increased by £5.9m to
£26.4m at 31 December 2025, from £20.5m at 31 December 2024. There was
£37.2m of net cash generated from operating activities (2024: £28.4m). Total
dividends paid in the year, being the ordinary and two special dividends,
increased by 18% to £26.0m (2024: £22.1m). Purchases of own shares in the
period were £0.9m (2024: £0.7m) purely for shares into the Employee Benefit
Trust. Net capital expenditure of £5.4m was slightly down on last year (2024:
£5.6m) with investment into the product slightly down on last year to £5.0m
(2024: £5.3m) and with other capex of £0.4m (2024: £0.3m).
Operating free cash flow conversion
£m 2025 2024
Cash generated from operations 44.5 37.3
Adjusted for:
Capital expenditure (5.4) (5.6)
Principal element of the lease payments in respect of IFRS 16 (0.1) (1.3)
Operating free cash flow 39.0 30.4
Operating profit 40.1 34.3
Operating free cash flow conversion 97% 89%
The Group's Operating Free Cash Flow Conversion (FCF) of 97% (2024: 89%) was
up on last year and better than expected due to higher receipts at year end.
Balance sheet
The significant movements in the Group's balance sheet, aside from the cash
balance which is described above, from 31 December 2024 to 31 December 2025
are detailed below.
Trade receivables decreased slightly from £8.6m at 31 December 2024 to £8.5m
at 31 December 2025. They remain extremely tightly controlled with overdue
debtors only £0.7m (2024: £0.5m) and these are all within 30 days overdue.
All of the year end receivables have now been collected.
Accrued income was up on last year end at £5.5m (31 December 2024: £4.7m).
Corporation tax recoverable of £0.7m was down on last year (31 December 2024:
£2.8m) due to settlements received related to R&D claims.
Trade and other payables balance increased by £1.5m to £13.2m (31 December
2024: £11.7m) which was driven primarily increased amounts due relating to
payroll, including profit share.
Contract liabilities relating to software licences increased slightly to
£9.2m (31 December 2024: £8.1m). Contract liabilities from deferred
maintenance decreased to £4.7m (31 December 2024: £7.6m) as more customers
moved onto monthly Subscription payments.
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 31.
DEFINITIONS
Constant currency
When the Company believes it would be helpful for understanding trends in its
business, the Company provides percentage increases or decreases in its
revenues to eliminate the effect of changes in currency values. When trend
information is expressed herein "in constant currencies", the comparative
results are derived by re-calculating comparative non-GBP denominated revenues
using the average exchange rates of the comparable months in the current
reporting period.
Operating Free Cash Flow (FCF) conversion
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:
2025 2024
Unaudited £m £m
Cash generated from operations 44.5 37.3
Capital expenditure (5.4) (5.6)
Principal element of lease payments (0.1) (1.3)
Operating FCF generated 39.0 30.4
Operating profit 40.1 34.3
Operating FCF Conversion 97% 89%
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 2025 2024
USD 1.32 1.30
EUR 1.17 1.18
Investment in product
This represents the cost of time invested into developing and enhancing the
software, including on specific customer developments that are largely
chargeable. It is calculated by multiplying the time spent by a day rate which
is based on salary costs (varying by seniority) plus a flat overhead
allocation.
Annual Recurring Revenue (ARR)*
Represents the average value of customer Subscription contracts in the six
months to the reporting date, annualised.
Excludes any revenues that are one-time or, at contract inception, not
expected to be recurring for a period more than 12 months.
Net Revenue Retention % (NRR)*
Measures the percentage of recurring revenue retained from customers over the
last 12 months, including upsells and expansions, and net of customer losses.
* These measures have been included to reflect the increased importance of
Subscription revenues to the Group.
Consolidated statement of profit or loss and comprehensive income
£m Note 2025 2024
Continuing operations
Revenue 5 126.7 109.9
Cost of sales (46.0) (39.0)
Gross profit 80.7 70.9
Sales, general and administrative expenses (41.0) (36.6)
Other income 0.4 -
Operating profit 6 40.1 34.3
Finance income 10 0.7 0.5
Finance expense 10 (0.7) (0.7)
Profit before taxation 40.1 34.1
Taxation 11 (10.0) (8.5)
Profit for the financial year 30.1 25.6
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations 26 (0.2) (0.1)
Other comprehensive (loss) net of tax (0.2) (0.1)
Total comprehensive income for the year 29.9 25.5
Earnings per share (in pence)
Basic 12 10.19 8.68
Diluted 12 10.14 8.56
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 2025 2024
Assets
Non-current assets
Goodwill 14 24.7 24.7
Other intangible assets 15 12.5 9.3
Property, plant and equipment 16 0.7 0.7
Right-of-use assets 17 6.7 7.7
Deferred tax assets 18 0.4 0.5
Total non-current assets 45.0 42.9
Current assets
Trade receivables 19 8.5 8.6
Accrued income 20 5.5 4.7
Prepayments 20 4.4 4.9
Other receivables 20 0.2 0.3
Corporation tax recoverable 20 0.7 2.8
Cash and cash equivalents 21 26.4 20.5
Total current assets 45.7 41.8
Total assets 90.7 84.7
Liabilities and equity
Current liabilities
Trade and other payables 22 13.2 11.7
Lease liabilities 23 1.2 0.1
Provisions for other liabilities 24 0.3 -
Contract liabilities 22 13.9 15.7
Total current liabilities 28.6 27.5
Non-current liabilities
Lease liabilities 23 8.1 9.2
Provisions for other liabilities 24 0.6 0.8
Deferred tax liabilities 18 1.7 1.0
Total non-current liabilities 10.4 11.0
Total liabilities 39.0 38.5
Capital and reserves
Share capital 25 0.3 0.3
Translation reserve 26 (0.1) 0.1
Own shares 27 (6.5) (7.9)
Retained earnings 58.0 53.7
Total equity 51.7 46.2
Total liabilities and equity 90.7 84.7
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 reserve Retained earnings Equity attributable to owners of the parent
Balance as at 1 January 2024 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 28 - - - 1.1 1.1
Equity-settled share-based payment schemes - deferred tax impact 18 - - - 0.4 0.4
Dividends 30 - - - (22.1) (22.1)
Own shares distributed 27 - 1.5 - (1.5) -
Own shares acquired 27 - (0.7) - - (0.7)
Balance as at 31 December 2024 0.3 (7.9) 0.1 53.7 46.2
Profit for the financial year - - - 30.1 30.1
Other comprehensive (loss) - - (0.2) - (0.2)
Total comprehensive income for the year - - (0.2) 30.1 29.9
Transactions with owners in their capacity as owners:
Equity-settled share-based payment schemes 28 - - - 1.6 1.6
Equity-settled share-based payment schemes - deferred tax impact 18 - - - 0.1 0.1
Dividends 30 - - - (26.0) (26.0)
Own shares distributed 27 - 2.3 - (1.5) 0.8
Own shares acquired 27 - (0.9) - - (0.9)
Balance as at 31 December 2025 0.3 (6.5) (0.1) 58.0 51.7
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated statement of cash flows
£m Note 2025 2024
Cash flows from operating activities
Profit before tax 40.1 34.1
Net finance costs - 0.2
Operating profit 40.1 34.3
Adjustments:
Depreciation 6/16/17 1.5 1.7
Amortisation 6/15 1.8 1.0
Share-based payment charge 28 1.6 1.1
RDEC tax (credit)/charge 6 (0.4) 0.1
Increase in provisions 24 0.1 0.1
Movements in working capital:
(Decrease)/increase in contract liabilities 22 (1.8) 1.5
(Increase) in trade and other receivables 19/20 (0.1) (4.2)
Increase in trade and other payables (excluding contract liabilities) 22 1.7 1.7
Cash generated from operations 44.5 37.3
Interest element on lease payments 10/23 (0.7) (0.6)
Other interest paid 10 - (0.1)
Income taxes paid (6.6) (8.2)
Net cash generated from operating activities 37.2 28.4
Cash flows from investing activities
Payments for purchases of property, plant and equipment 16 (0.4) (0.3)
Payments for internally developed software 15 (5.0) (5.3)
Payments in relation to direct costs associated with lease extensions - (0.3)
Interest received 10 0.7 0.5
Net cash outflow from investing activities (4.7) (5.4)
Cash flows from financing activities
Dividends paid to Company shareholders 30 (26.0) (22.1)
Payments of lease liabilities (principal) 23 (0.1) (1.3)
Purchase of own shares 27 (0.9) (0.7)
Sale of own shares 0.6 -
Cash used in financing activities (26.4) (24.1)
Net increase/(decrease) in cash 6.1 (1.1)
Cash and cash equivalents at the beginning of the year 21 20.5 21.8
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 21 26.4 20.5
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
2025
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) and its subsidiaries,
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, Americas, and Australasia.
1.1 Basis of preparation
Statement of Compliance
The preliminary results for the year ended 31 December 2025 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
2025 Annual Report. The accounting policies adopted in this preliminary
announcement are consistent with the Annual Report for the year ended 31
December 2025.
The financial information has been extracted from the financial statements for
the year ended 31 December 2025, which have been approved by the Board of
Directors on 11 March 2026. 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 2024 have been
extracted from the Group's statutory accounts for that financial year. The
Board of Directors approved the 2024 Group financial statements on 12 March
2025, 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:
l IFRS 18 - 'Presentation and Disclosures in Financial Statements' (effective 1
January 2027)
l UK Sustainability Reporting Standards - UK SRS S1 'General Requirements for
Disclosure of Sustainability‑related Financial Information' and UK SRS S2
'Climate‑related Disclosures' (published in February 2026 and available for
voluntary use in the UK)
The Directors have not yet completed a detailed assessment of the impact of
these new and revised standards. IFRS 18 is not expected to have a material
impact on the recognition and measurement of the Group's assets and
liabilities but is expected to affect the presentation and disclosures in
future periods. UK SRS S1 and UK SRS S2 are expected to impact the nature and
extent of the Group's sustainability‑related and climate‑related
disclosures rather than the amounts recognised in the consolidated financial
statements.
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.
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 development, the
recognition of customised licence revenue, and any one-off licence fees.
c. Delivery revenues are revenues from any work done for customers including
pre-implementation, implementation work and ongoing services.
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 2025 and 2024 below:
2025 2024
Closing Average Closing Average
USD 1.35 1.32 1.25 1.28
EUR 1.15 1.17 1.21 1.18
NZD 2.34 2.27 2.24 2.11
AUD 2.02 2.05 2.02 1.94
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:
l 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.
l 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).
l 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.
Costs to obtain contracts
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 20). 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 or 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,
deferred income tax assets and liabilities are not recognised on the initial
recognition of an asset or liability in a transaction other than a business
combination which, at the time of the transaction, affects neither accounting
nor taxable profit and does not give rise to equal taxable and deductible
temporary differences.
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:
l Fixed lease payments (including in substance fixed payments), less any lease
incentives;
l Variable lease payments that depend on an index or rate, initially measured
using the index or rate at the commencement date;
l The amount expected to be payable by the lessee under residual value
guarantees;
l The exercise price of purchase options, if the lessee is reasonably certain to
exercise the options; and
l 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 remeasures the lease liability (and makes a corresponding adjustment
to the related right‑of‑use asset) whenever:
l 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 remeasured by
discounting the revised lease payments using a revised discount rate;
l 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 remeasured 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
l A lease contract is modified and the lease modification is not accounted for
as a separate lease, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
Right-of-use assets
The right‑of‑use assets comprise:
l The initial measurement of the corresponding lease liability;
l Lease payments made at, or before, the commencement day;
l Any initial direct costs; and
l 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:
l Amortised cost;
l Fair value through profit or loss (FVTPL); and
l Fair value through other comprehensive income (FVOCI).
l In the periods presented, the Group does not have any material financial
assets categorised as FVTPL or FVOCI. The classification is determined by
both:
l The entity's business model for managing the financial asset; and
l 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):
l They are held within a business model whose objective is to hold the financial
assets and collect their contractual cash flows; and
l 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
19 and 20) and cash and cash equivalents (note 21) 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:
l Fixtures and fittings: 3-10 years
l 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:
l 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;
l Its ability to use or sell the intangible asset, including how the intangible
asset will generate probable future economic benefits;
l The existence of a market or, if it is to be used internally, the usefulness
of the intangible asset;
l The availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
l 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:
l Computer software: licence period or 10 years as applicable
l 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 27).
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 Cash flow forecasting and foreign exchange sensitivity Natural hedging from localised cost base and conversion of foreign currency
entity's 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 checks and contractual payment terms
Credit ratings
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 19.
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 2025 and 2024 to hedge against
foreign currency exposure. The Group has no outstanding commercial foreign
exchange contracts at 31 December 2025 (2024: three outstanding with £(0.1)m
fair value). No hedge accounting has been applied in the current or prior
year.
A 10% increase in the USD:GBP exchange rate in the year ended 31 December 2025
would have increased revenue and profit by 4% and 9% respectively (2024: 4%
and 9% 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 2025 (2024:
31 December 2024), 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 2025 and 31 December 2024 was nil
for both trade receivables and accrued income.
See note 19 - 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
21) 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 2025
£m Total Less than 6 months Between Between Between More than
6 to 12 months 1 to 2 2 to 5 5 years
years years
Trade and other payables 9.4 9.4 - - - -
Lease liabilities - future lease payments 12.7 0.9 0.9 1.8 3.4 5.7
31 December 2024
£m Total Less than 6 months Between 6 to 12 months Between 1 to 2 Between 2 to 5 More than 5 years
years 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
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 2025 2024
Subscription 43.6 37.5
Software Engineering 19.6 17.4
Delivery 63.5 55.0
Total revenue 126.7 109.9
4.2 Non-current assets geographical information
Non-current assets attributable to each geographical market:
£m 2025 2024
EMEA* 43.5 40.9
Americas* 0.6 0.8
Rest of World 0.5 0.7
Total non-current assets 44.6 42.4
*The breakdown of non-current assets geographical information has been changed
to better reflect the operations of the Group. The total remains unchanged.
Revenue by geographical market is contained within note 5.3. The table above
excludes deferred tax assets for both 2025 and 2024.
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 2025 and 2024.
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:
2025
£m Subscription Software Delivery Total
Engineering revenue
At a point in time - time and materials - 7.2 38.8 46.0
At a point in time - fixed price 0.1 0.9 - 1.0
Over time - time and materials - 9.8 23.9 33.7
Over time - fixed price 43.5 1.7 0.8 46.0
Total revenue 43.6 19.6 63.5 126.7
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
All goods and services are sold directly to customers.
5.3 Revenue geographical information
Revenue attributable to each geographical market based on where the customer
mainly utilises its instance of Alfa, or where the service is rendered, is as
follows:
£m 2025 2024
EMEA* 62.1 55.6
Americas* 56.8 46.1
Rest of World 7.8 8.2
Total revenue 126.7 109.9
* The breakdown of revenue by geography has been changed to better reflect the
operations of the Group. Previously named UK and rest of EMEA have been
combined into EMEA. The other categories and total remains unchanged.
Revenue attributable to the UK is £34.9m (2024: £32.0m) and this is included
within the EMEA revenue.
5.4 Revenue by currency
Revenue by contractual currency is as follows:
£m 2025 2024
GBP 47.9 40.4
USD 54.6 46.5
EUR 16.4 14.8
Other 7.8 8.2
Total revenue 126.7 109.9
5.5 Liabilities from contracts with customers
£m 2025 2024
Contract liabilities - deferred licence and fees 9.2 8.1
Contract liabilities - deferred maintenance 4.7 7.6
Total contract liabilities 13.9 15.7
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
2025 and 31 December 2024 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:
l Any new upfront software licence payments;
l Any write back in previously recognised revenue as a result of project
extensions or re-plans;
l Decreasing percentage-of-completion of development efforts; and
l Any additional material right balances that are added during the year.
l The deferred licence contract liability balance will decrease during the year
as a result of:
l Increasing percentage-of-completion of development efforts; and
l 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 2025 and 31 December 2024 therefore
represents the Group's unsatisfied maintenance performance obligation for
which the revenue has been invoiced in advance.
5.6 Unsatisfied performance obligations
The Group has unsatisfied or partially satisfied performance obligations at 31
December 2025 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
2025, the Group also has unsatisfied or partially satisfied performance
obligations at 31 December 2025 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 2025 is £7.2m (2024: £9.9m). 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 £7.2m, it is expected that £3.3m 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:
l Any possible contract modifications;
l Currency fluctuations;
l External market factors; and
l 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. Discounts or rebates are allocated
proportionately to all performance obligations unless there is observable
evidence that they relate entirely to one or more specific performance
obligations, in which case they are allocated accordingly, in line with IFRS
15.
Contract modifications are accounted for as a separate contract when the scope
of the contract increases due to the addition of distinct goods or services
and the price reflects their stand-alone selling prices. In all other cases,
modifications are accounted for as part of the existing contract, with revenue
recognised on a cumulative catch-up basis or prospectively, as appropriate, in
accordance with IFRS 15.
6. Operating profit
The following items have been included in arriving at operating profit:
£m 2025 2024
Research and development costs 2.8 2.3
Depreciation of property, plant and equipment 0.4 0.6
Depreciation of right-of-use lease assets 1.1 1.1
Amortisation of intangible assets 1.8 1.0
Foreign exchange loss/(gain) 0.7 (0.2)
Realised and unrealised net (gain) on forward contracts (1.5) (0.3)
Share-based payments (including social security contributions) 1.9 1.4
RDEC(*) (0.4) 0.1
* The Company has claimed credits under the UK RDEC regime in respect of 2023
and 2024 and intends to claim for 2025. The amount of the estimated RDEC
credit is required to be recognised as both other income (which is taxable)
and as a recoverable. In 2025, following the finalisation of the 2023 tax
return, the RDEC benefit for 2023 was increased by £0.2m. In addition, an
estimated £0.2m RDEC benefit was recognised for 2025, resulting in
recognition of £0.4m in 2025.
7. Personnel-related costs
£m 2025 2024
Wages and salaries 50.4 44.4
Social security contributions (on wages and salaries) 5.8 5.2
Pension costs 4.1 3.5
Less: capitalisation (5.0) (5.3)
55.3 47.8
Profit share pay(*) 5.0 4.2
Share-based payments (including social security contributions) 1.9 1.4
Total employment costs 62.2 53.4
* Profit share pay refers to a pool of money (that equates to approximately
10% of the Group's pre-tax profits) which is shared amongst the employees,
excluding Directors and some other senior managers, as a percentage of basic
salary The amount disclosed includes the related social security
contributions.
Average monthly number of people employed based on location (including 2025 2024
Executive Directors)
EMEA* 367 357
Americas* 119 99
Rest of World 30 29
Total average monthly number of people employed 516 485
* The split of employees has been changed to better reflect the operations of
the Group. The UK headcount, as disclosed previously, is included within the
EMEA headcount. The total remains unchanged.
At 31 December 2025, the Group had 527 employees (2024: 502).
8. Key management
Key management compensation (including Directors):
£m 2025 2024
Wages, salaries and short-term benefits 2.5 2.3
Social security contributions 0.5 0.3
Share-based payments (including social security contributions) 1.2 0.5
Total key management compensation 4.2 3.1
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 2025 2024
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 2025 2024
Finance income
Interest income on cash or short-term bank deposits 0.7 0.5
£m Note 2025 2024
Finance expense
Interest on lease liabilities 23 (0.7) (0.6)
Other interest expense - (0.1)
Total finance expense (0.7) (0.7)
11. Income tax expense
Analysis of charge for the year
£m 2025 2024
Current tax:
Current tax on profit for the year 8.5 6.8
Adjustment in respect of prior years (0.1) (0.2)
Foreign tax on profit of subsidiaries for the current year 0.8 0.7
Current tax charge 9.2 7.3
Deferred tax:
Deferred tax on profits for the year 0.9 1.2
Other (0.1) -
Deferred tax charge 0.8 1.2
Total tax charge in the year 10.0 8.5
The effective tax rate for 2025 and 2024 is in line with the standard rate of
corporation tax in the UK. The effective tax rate for the year ended 31
December 2025 was 24.9% (2024: 24.9%).
The overall tax charge for the year is reconciled as follows:
Analysis of charge for the year
£m 2025 2024
Profit on ordinary activities before taxation 40.1 34.1
Profit on ordinary activities at the standard rate of corporation tax 25% 10.0 8.5
(2024: 25%)
Tax effects of:
Adjustment in respect of prior years (0.1) (0.2)
Impact of expenses not deductible for tax purposes 0.1 -
Other - 0.2
Total tax charge for the year 10.0 8.5
12. Earnings per share
2025 2024
Profit attributable to equity holders of Alfa (£m) 30.1 25.6
Weighted average number of shares outstanding during the year 295,778,634 294,925,812
Basic earnings per share (pence per share) 10.19 8.68
Weighted average number of shares outstanding including potentially dilutive 297,234,511 298,962,970
shares
Diluted earnings per share (pence per share) 10.14 8.56
The weighted average number of ordinary shares in issue excludes 4,221,366
(2024: 5,074,188) 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 1,455,878 (2024: 4,037,158)
potentially dilutive ordinary shares.
13. Financial assets and liabilities
£m Note 2025 2024
Financial assets
Financial assets at amortised cost:
Trade receivables 19 8.5 8.6
Other financial assets at amortised cost 20 5.7 5.0
Cash and cash equivalents 21 26.4 20.5
Total financial assets 40.6 34.1
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 22 9.4 8.4
Lease liabilities 23 9.3 9.3
Total financial liabilities 18.7 17.7
14. Goodwill
£m 2025 2024
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 11.1% (2024: 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% (2024: 2.5%)
average growth rate which is reflective of management's best estimate at the
time.
Management believes that any reasonable change in any of the key assumptions
on which the recoverable amount is based would not cause the reported carrying
amount to exceed the recoverable amount of the CGU.
15. Other intangible assets
£m Computer software Internally generated software Total
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
Cost
At 1 January 2025 1.0 12.4 13.4
Additions - 5.0 5.0
At 31 December 2025 1.0 17.4 18.4
Amortisation
At 1 January 2025 0.6 3.5 4.1
Charge for the period 0.1 1.7 1.8
At 31 December 2025 0.7 5.2 5.9
Net book value
At 31 December 2025 0.3 12.2 12.5
Significant movement in other intangible assets
During 2025, Alfa developed new internally generated software at a cost of
£5.0m (2024: £5.3m). This software will be amortised over three to five
years.
The total research and product development expense for the period was £2.8m
(2024: £2.3m).
16. Property, plant and equipment
£m Fixtures and fittings IT equipment Total
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
Cost
At 1 January 2025 1.5 1.8 3.3
Additions - 0.4 0.4
Disposals - (0.4) (0.4)
At 31 December 2025 1.5 1.8 3.3
Depreciation
At 1 January 2025 1.2 1.4 2.6
Charge for the year 0.1 0.3 0.4
Disposals - (0.4) (0.4)
At 31 December 2025 1.3 1.3 2.6
Net book value
At 31 December 2025 0.2 0.5 0.7
17. Right-of-use assets
£m Motor vehicles Property Total
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
Cost
At 1 January 2025 0.7 13.3 14.0
Additions 0.1 - 0.1
Disposals (0.1) (0.3) (0.4)
At 31 December 2025 0.7 13.0 13.7
Depreciation
At 1 January 2025 0.3 6.0 6.3
Charge for the year 0.2 0.9 1.1
Disposals (0.1) (0.3) (0.4)
At 31 December 2025 0.4 6.6 7.0
Net book value
At 31 December 2025 0.3 6.4 6.7
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 2025 2024
Depreciation (1.1) (1.1)
Interest expense (0.7) (0.6)
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 2025 2024
Balance as at 1 January (0.5) 0.3
Deferred income taxes recognised in the consolidated statement of profit or (0.9) (1.2)
loss and comprehensive income
Deferred tax on share-based payments recognised in reserves 0.1 0.4
Balance as at 31 December (1.3) (0.5)
Consisting of:
Depreciation in excess of capital allowances - 0.1
Capital allowances in excess of depreciation (0.1) -
Other timing differences (1.2) (0.6)
Balance as at 31 December (1.3) (0.5)
At the reporting date, the provision for deferred tax comprised net deferred
tax assets relating to overseas group companies of £0.4m (2024: £0.5m) and
net deferred tax liabilities relating to the UK of £(1.7)m (2024: £(1.0)m).
The table above shows the net of these balances, being deferred tax
liabilities of £1.3m (2024: deferred tax liabilities of £0.5m).
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 £4.5m at 31 December 2025
(2024: £2.7m).
19. Trade receivables
£m 2025 2024
Trade receivables 8.5 8.6
Provision for impairment - -
Trade receivables - net 8.5 8.6
Ageing of trade receivables
£m 2025 2024
Within agreed terms 7.8 8.1
Past due 1-30 days 0.7 0.5
Past due 31-90 days - -
Past due 91+ days - -
Trade receivables - net 8.5 8.6
The Group believes that the amounts that are past due are fully recoverable,
all overdue amounts have been received by signing date, and there are no
indicators of future delinquency or potential litigation.
Currency of trade receivables
£m 2025 2024
GBP 3.0 3.0
USD 4.7 4.8
Other 0.8 0.8
Trade receivables - net 8.5 8.6
Trade receivables due from significant customers
There were no customers with revenue accounting for more than 10% of total
revenue in 2025 and 2024.
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.
20. Other receivables held at amortised cost
£m 2025 2024
Accrued income 5.5 4.7
Prepayments 4.4 4.9
Corporation tax recoverable 0.7 2.8
Other receivables 0.2 0.3
Total other receivables held at amortised cost 10.8 12.7
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 £0.7m of deferred costs in relation to costs to fulfil
contracts (2024: £1.0m) and £0.3m in relation to costs to obtain contracts
(2024: £0.4m). During the year £0.4m (2024: £0.3m) relating to costs to
fulfil contracts has been recognised within cost of sales and £0.1m (2024:
£0.1m) in relation to costs to obtain contracts has been recognised within
sales, general and administrative expenses.
Corporation tax recoverable at the reporting date of £0.7m (2024: £2.8m)
represents predominately UK tax of £0.3m (2024: £2.3m), and an amount of
£0.4m (2024: £0.4m) relating to RDEC recoverable.
21. Cash and cash equivalents
£m 2025 2024
Cash at bank and in hand 26.4 20.5
Cash and cash equivalents 26.4 20.5
Currency of cash and cash equivalents
£m 2025 2024
GBP 12.5 8.6
USD 8.5 6.1
AUD 2.0 2.1
EUR 2.4 2.5
Other 1.0 1.2
Cash and cash equivalents 26.4 20.5
Cash and cash equivalents are all held with banks and other financial
institutions which must fulfil credit rating and investment criteria approved
by the Board.
22. Current and non-current liabilities
£m 2025 2024
Trade payables 0.8 1.0
Other payables 12.4 10.7
Contract liabilities - deferred licence and fees 9.2 8.1
Contract liabilities - deferred maintenance 4.7 7.6
Deferred tax liability 1.7 1.0
Lease liabilities (note 23) 9.3 9.3
Provisions for other liabilities (note 24) 0.9 0.8
Total current and non-current liabilities 39.0 38.5
Less non-current portion (10.4) (11.0)
Total current liabilities 28.6 27.5
Other payables includes amounts relating to other tax and social security of
£3.8m (2024: £3.3m). Of the remainder, £6.8m (2024: £5.8m) relates to
amounts due as part of payroll.
23. Lease liabilities
The following table sets out the reconciliation of the lease liabilities from
1 January 2024 to the amount disclosed at 31 December 2025:
£m Total
Lease liabilities recognised at 1 January 2024 8.2
Additions 2.4
Interest charge 0.6
Payments made on lease liabilities (1.9)
At 31 December 2024 9.3
Additions 0.1
Interest charge 0.7
Payments made on lease liabilities (0.8)
At 31 December 2025 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 2025 were £0.8m (2024: £1.9m).
Below is the maturity analysis of the lease liabilities:
£m 2025 2024
Non-current 8.1 9.2
Current 1.2 0.1
Total lease liabilities 9.3 9.3
No later than one year 1.8 0.8
Between one year and five years 5.2 6.6
Later than five years 5.7 6.0
Total future lease payments 12.7 13.4
Total future interest payments (3.4) (4.1)
Total lease liabilities 9.3 9.3
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.
24. Provision for other liabilities
£m
At 1 January 2024 0.7
Provided in the period 0.4
Utilised in the period (0.3)
Released in the period -
At 31 December 2024 0.8
Provided in the period 0.4
Utilised in the period (0.3)
Released in the period -
At 31 December 2025 0.9
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 £0.6m over various years.
25. Share capital
2025 2024
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 2025 or 2024.
26. Translation reserve
£m 2025 2024
At 1 January 0.1 0.2
Currency translation of subsidiaries (0.2) (0.1)
At 31 December (0.1) 0.1
27. Own shares
£m 2025 2024
Balance at 1 January 7.9 8.7
Acquired in the year 0.9 0.7
Distributed on exercise of options (2.3) (1.5)
Balance at 31 December 6.5 7.9
The own shares reserve represents the cost of shares in Alfa Financial
Software Holdings PLC that have been:
l 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
2025 was 539,667 (31 December 2024: 83,904); and
l 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 2025 was 3,369,802 (31 December
2024: 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 2025, the Group held
1.30% (31 December 2024: 1.62%) of its own called-up share capital.
28. Share awards
The Group recognised total expenses relating to share-based payment of £1.9m
(2024: £1.4m) in the current year. Of this, £1.7m (2024: £1.1m) relates to
equity-settled LTIP schemes and £0.2m (2024: £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 Share options 31 December 2025 Share options 31 December 2024
price
November 2021 Service Only UK Employee ShareSave January 2025 153.6p 3,515 168,146
April 2022 Service and Performance LTIP April 2025 0p - 741,162
April 2022 Service Only LTIP April 2025 0p 3,656 231,290
May 2022 Service Only UK Employee ShareSave June 2025 132.8p 4,066 211,673
September 2022 Service Only LTIP September 2025 0p - 5,917
April 2023 Service and Performance LTIP April 2026 0p 913,963 913,963
April 2023 Service Only LTIP April 2026 0p 353,418 374,948
April 2023 Service Only UK Employee ShareSave June 2026 109.6p 837,787 841,071
April 2023 Service Only US Employee ShareSave June 2025 116.5p - 54,960
April 2024 Service and Performance LTIP April 2027 0p 720,024 720,024
April 2024 Service Only LTIP April 2027 0p 325,718 342,774
April 2024 Service Only US Employee ShareSave June 2026 146.0p 27,675 30,274
May 2024 Service Only UK Employee ShareSave June 2027 137.4p 191,958 194,657
September 2024 Service Only LTIP September 2027 0p 3,164 3,164
April 2025 Service and Performance LTIP April 2028 0p 561,593 -
April 2025 Service Only LTIP April 2028 0p 358,670 -
April 2025 Service Only US Employee ShareSave June 2027 173.0p 64,899 -
May 2025 Service Only UK Employee ShareSave June 2028 162.8p 391,860 -
October 2025 Service Only LTIP October 2028 0p 866 -
The weighted average share price at the date of exercise for share options
exercised during the period was 214.1 pence (2024: 177.4 pence). The options
outstanding at 31 December 2025 had a weighted average exercise price of
41.7p pence (2024: 38.0 pence), and a weighted average remaining contractual
life of 1.1 years (2024: 1.5 years).
The opening weighted average exercise price at 1 January 2025 was 38.0 pence
(1 January 2024: 34.7 pence). The weighted average exercise price of options
forfeited and exercised during the year was 134.7 pence (31 December 2024:
146.5 pence). The expected price volatility is based on the historical
volatility adjusted for any expected changes to future volatility due to
publicly available information.
The weighted average exercise price of options granted in the period is 51.5
pence (2024: 24.1 pence).
The total share-based payment charge relating to Alfa Financial Software
Holdings PLC shares for the year is split as follows:
£m 2025 2024
Employee share schemes - value of services 1.6 1.1
Expense in relation to fair value of social security liability on employee 0.3 0.3
share schemes
Total cost of employee share schemes 1.9 1.4
Details of the share options outstanding during the year are as follows:
2025 2024
Outstanding at 1 January 4,834,023 4,782,079
Conditionally awarded in year 1,472,311 1,290,893
Exercised (1,308,035) (977,712)
Forfeited or expired in year (235,467) (261,237)
Outstanding at 31 December 4,762,832 4,834,023
Exercisable at the end of the year - -
28.1 LTIPs
The 2022 April and 2022 September LTIP awards vested during the year. The
exercise of these awards had a net impact of £1.5m on own shares and £1.5m
on retained earnings.
The 2023 April and 2024 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 2023 April LTIP awards, the 2024 April LTIP awards, and the September 2024
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 2025 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 2025 based on information at the date of grant:
LTIP awards (granted in April) TSR element EPS element
Share price at date of grant 205.5p 205.5p
Award price 0p 0p
Volatility 38.5% -
Embedded TSR (4.3)% -
Average correlation 25.0% -
Life of award 3 years 3 years
Risk-free rate 3.77% -
Fair value per award 116.2p 181.8p
In April 2025, the Group awarded to certain employees an LTIP conditional on
employment only. The fair value of these awards on the date of grant is 181.8
pence, discounted by the expected 12-month dividend yield to reflect the lack
of dividend accrual over the vesting period (three years).
In October 2025, 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 2025 awards mentioned above, i.e. 181.8 pence.
All of these Company schemes, as well as any non-cyclical awards, are
equity-settled by award of ordinary shares.
28.2 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 2025
SAYE ESPP
Number of share options Exercise Number of share options Exercise
price price
Outstanding at beginning of year 1,415,547 122.1p 85,234 127.0p
Conditionally awarded in year 391,860 162.8p 64,899 173.0p
Exercised during the year (364,106) 142.2p (50,786) 116.5p
Forfeited or expired in year (14,115) 128.3p (6,773) 127.8p
Outstanding at the end of the year(*) 1,429,186 128.1p 92,574 164.9p
Exercisable at the end of the year 7,581 142.4p - -
* The exercise price is a weighted average.
The inputs used in the calculation of the fair value of options granted in the
year were as follows:
SAYE ESPP
31 December 31 December
2025 2025
Share price 240.5p 205.5p
Exercise price 162.8p 173.0p
Expected volatility 38.6% 39.8%
Expected life 36 months 24 months
Risk-free rate 3.67% 3.74%
Expected dividend yields 4.0% 4.0%
Fair value per award 87.9p 55.9p
29. Unrecognised items
29.1 Contingencies and commitments
The Group has no capital commitments, no material contingent liabilities and
no contingent assets.
29.2 Events occurring after the reporting period
There have been no reportable subsequent events.
30. Dividends
A special dividend of 2.4 pence per share was paid on 30 May 2025 amounting to
£7.1m (2024: £5.9m at 2.0 pence per share).
An ordinary dividend of 1.4 pence per share was paid on 27 June 2025 amounting
to £4.1m (2024: £3.8m at 1.3 pence per share).
A special dividend of 5.0 pence per share was paid on 7 November 2025
amounting to £14.8m (2024: £12.4m at 4.2 pence per share).
Subject to approval at the AGM on 30 April 2026, a 2025 final dividend of 1.5
pence per share will be paid on 26 June 2026 to holders on the register on 29
May 2026. The ordinary shares will be quoted ex-dividend on 28 May 2026. In
addition, the Board has decided to declare a special dividend of 3.1 pence per
share, with an ex-dividend date of 30 April 2026, a record date of 1 May 2026
and a payment date of 29 May 2026.
31. Related parties
31.1 Controlling shareholder
The ultimate parent undertaking as at 31 December 2025 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. The ultimate controlling party is Andrew
Page.
31.2 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
was accounted for using the equity method.
Registered address and country of incorporation Principal activity Held by Company 2025 Held by Held by Company 2024 Held by
Group Group
2025 2024
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, New Services - 100% - 100%
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%
* 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.
31.3 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 £14.2m were paid to the ultimate parent (2024:
£12.4m).
Dividends of 2.4 pence, 1.4 pence and 5.0 pence per share were paid to all
shareholders in 2025 (2024: 2.0 pence, 1.3 pence and 4.2 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
2025 the investment is carried at £nil (2024: £nil) and the loan is carried
at £nil (2024: £nil).
In 2024 Alfa Financial Software Limited paid expenses of £0.1m on behalf of
Alfa iQ Limited. There were no transactions with Alfa iQ Limited in 2025.
In 2024, expenses relating to property of £0.02m were paid on behalf of the
ultimate parent and these were fully recharged back to the ultimate parent at
no mark up. There have been no transactions in 2025.
The balances outstanding from the ultimate parent at 31 December 2025 and 2024
were £nil and £nil respectively.
There were no other outstanding balances from related parties at the end of
the reporting period.
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 2025.
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 2025, 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
11 March 2026
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