Alfa Financial Software (ALFA) H1 2026 earnings summary

Executive summary

• Subscription revenue grew 14% year-over-year to £24.1m, now 37% of total revenue, with ARR up 17% to £48.5m and NRR at 110%.

• TCV increased 17% to £247m, supported by two new customer wins, two go-lives, and a robust late-stage pipeline.

• Operating profit was £18.4m, down 15% due to £1.6m severance costs and FX impacts; excluding these, operating profit rose 2%.

• Ongoing investment in product, delivery, and AI capabilities, including the launch of Theia AI product group.

• Net cash position at £22.2m, with no bank debt and strong cash generation.

Financial highlights

• Revenue reached £65.1m, up 5% at constant currency; gross margin declined 400bps to 60.2% due to lower software engineering revenue and severance costs.

• Subscription revenue up 14% to £24.1m; delivery revenue up 5% to £32.4m; software engineering revenue down 17% to £8.6m.

• Operating profit margin at 28%; EBITDA margin at 31.3%; basic and diluted EPS down 15% to 4.55p.

• Cash conversion at 76%, impacted by timing of customer receipts and accelerated H2 2025 receipts.

• £13.7m in dividends paid, including a £9.2m special dividend; closing cash balance at £22.2m.

Outlook and guidance

• Full-year expectations reaffirmed, with continued strong growth in subscription revenues anticipated.

• Delivery revenue growth expected to be slower, offset by improved software engineering revenues.

• Cash conversion for 2026 projected at 80–90%, with long-term guidance of 90–100%.

• Margins expected to improve over the medium term as recurring revenues grow.

• Enterprise software sales subject to timing risk, with some delays in project contracting.