Alfa Financial Software (ALFA) H2 2023 earnings summary

Executive summary

• FY23 revenue reached £102.0m, up 9%; operating profit rose 2% to £30.1m, with strong cash generation and progress in the transition to subscriptions.

• Subscription revenue grew 16%, subscription TCV rose 28%, and total TCV increased 16% to £165m.

• Strategic priorities included Alfa Systems 6, product and delivery investment, and expansion of the implementation pipeline.

Financial highlights

• Revenue was £102.0m, up 9% YoY at actual and constant currency; gross profit margin was 62% vs 64% in 2022.

• Operating profit rose 2% to £30.1m; operating margin was 30% vs 32%, and profit before tax was £29.6m, up 2%.

• Basic EPS was 8.0p, down 3%; diluted EPS was 7.9p, down 2%, reflecting a higher effective tax rate.

• Operating expenses rose 13%; included £0.6m of one-off costs relating to a possible transaction.

Outlook and guidance

• FY24 revenue growth expected in the mid-to-high single digits, with greater H2 weighting as new projects start; services and software expected to grow through the year.

• Strong sequential subscription revenue growth expected; investment in the business continues ahead of growth.

• Cash conversion expected to trend toward 100% on average as exceptionally strong FY23 year-end cash performance unwinds.

• Effective tax rate expected at 26% in 2024 and for the foreseeable future, reflecting the UK rate increase and no R&D credit.