Alfa Financial Software (ALFA) H1 2024 earnings summary

Executive summary

• Achieved record Total Contract Value (TCV) of £193m, up 40% year-over-year, driven by strong subscription growth, major US Auto and European equipment finance wins, and new customer acquisitions.

• Transition to SaaS as the exclusive delivery model accelerated, fueling 18% growth in subscription revenue and 26% growth in subscription TCV, now 35% of total revenue.

• Launched Alfa Systems 6 with 10 new modules and five of six functional instalments released, embedding AI and automation, and accelerating incremental sales for 2025.

• Declared a special dividend of 4.2p per share (~£12.4m) due to strong cash generation and lack of immediate investment requirements.

• Maintained high staff retention (96%) and industry-leading engagement, with accelerated recruitment to support growth.

Financial highlights

• H1 2024 revenue was £52.3m, down 1% year-over-year (flat at constant currency); operating profit £16.2m, down 4%, with EBITDA margin at 33%.

• Gross margin was 62.9% (down from 63.7%); profit for the period was £11.9m, down 11%.

• Cash balance at £22.0m with 95% cash conversion, reflecting strong collections and disciplined cost management.

• Basic and diluted EPS both down 10% due to higher UK tax rates and changes in R&D credits.

• Subscription revenues now account for 35% of total revenue, growing 18% year-over-year.

Outlook and guidance

• Full-year revenue expectations increased by £1m, with overall FY2024 revenue growth expected to be mid-high single digits and H2 performance anticipated to be stronger.

• Cash conversion for 2024 expected at 90%-100%, below long-term trend due to strong 2023 collections.

• Effective tax rate for the year projected at 26% due to UK tax changes.

• Currency sensitivity to USD rising, but largely hedged for 2024.

• Demand remains robust despite macroeconomic environment, with a strengthened pipeline and new wins.