Alfa Financial Software (ALFA) H1 2025 earnings summary

Executive summary

• Achieved strong first half with revenue up 22% year-over-year to £62.5m, driven by robust subscription and software engineering growth, and continued investment in product, people, and market expansion.

• Subscription revenue grew 17% year-over-year, now representing 34% of total revenue, with ARR up 16% to £42m and NRR at 112%.

• Operating profit rose 33% to £21.6m, with an operating margin of 35% and EBITDA margin of 37%.

• Declared a special dividend of 5p per share (c. £14.8m), reflecting strong cash generation and confidence in future prospects.

• Maintained high customer retention and accelerated new customer wins, supporting future growth.

Financial highlights

• Revenue reached £62.5m, up from £52.3m year-over-year; subscription revenue up 17% to £21.2m; software engineering revenue up 72% to £10.3m; delivery revenue up 10% to £31.0m.

• Total contract value (TCV) increased 9% year-over-year to £211m, with subscription TCV up 12% and next 12 months TCV up 25%.

• Cash balance at period end was £23.9m after £11.2m in dividends paid; operating free cash flow conversion at 88%.

• Basic EPS grew 33% and diluted EPS rose 34% to 5.35p per share.

• Gross margin improved by 130 basis points to 64.2%.

Outlook and guidance

• Full-year expectations remain unchanged, with double-digit revenue growth and mid-teens subscription growth anticipated.

• H2 expected to see similar revenue but lower operating margins due to higher costs, reduced chargeability in Software Engineering, and absence of FX hedge gains.

• Cash conversion for 2025 expected at 80–90%, rising to 90–100% from 2026 onwards.

• Effective tax rate expected at 26%.