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 and major new project wins, particularly in U.S. Auto and European equipment finance.

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

• Launched Alfa Systems 6 with 10 new modules and five of six functional instalments released, embedding AI and automation to accelerate future sales.

• Declared a special dividend of 4.2p per share (~£12.4m) and joined the UN Global Compact.

• Maintained high staff retention (96%) and industry-leading engagement, with headcount up 5% year-over-year.

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%.

• Cash balance at £22.0m with 95% cash conversion, following strong 2023 year-end collections.

• Basic and diluted EPS both down 10% to 4.05p and 4.00p, respectively, due to higher UK tax rates and R&D tax credit changes.

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

• Software revenues decreased 33% to £6.0m as SaaS transition continues and focus shifted to Alfa Systems 6 development.

Outlook and guidance

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

• Growth in 2024 expected to be second half weighted, with sequential subscription growth and ramp-up in services and software.

• Effective tax rate expected at 26% for 2024 and going forward due to UK tax changes.

• Currency sensitivity to USD increased for 2025, but largely hedged for 2024.

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