2021 Half-year Report

RNS Number : 5202M

Alfa Financial Software Hldgs PLC

22 September 2021

 

22 September 2021

Alfa Financial Software Holdings PLC

2021 Half Year Report

Stepping into our opportunity

Alfa Financial Software Holdings PLC ("Alfa" or the "Company"), a leading developer of software for the asset finance industry, today publishes its unaudited results for the six months ended 30 June 2021.

Financial highlights:

Results	H1 2021	H1 2020	Movement
£m, unless otherwise stated	Unaudited	Unaudited	%
Revenue	41.1	38.2	8%
Operating profit	11.4	10.4	9%
Profit before tax	11.0	10.1	9%
Earnings per share - basic (pence)	2.98	2.68	11%
Earnings per share - diluted (pence)	2.93	2.62	12%
Special Dividend declared per share (pence)	10.0	15.0	(33)%
£m, unless otherwise stated	H1 2021 Unaudited	31 Dec 2020 Audited	Movement %
Cash	50.0	37.0	35%

Key measures (1)	H1 2021	H1 2020	Movement
£m, unless otherwise stated	Unaudited	Unaudited	%
Revenue - constant currency	41.1	36.7	12%
Operating profit - constant currency	11.4	9.3	22%
Operating free cash flow conversion (%)	138%	108%	28%
Total Contract Value (TCV)	125.2	96.4	30%

^{(1) See definitions section for further information regarding calculation of measures not defined by IFRS.}

Overview/Summary:

· Revenue ahead of expectations and up 8% versus H1 2020 despite currency headwinds

· Operating profit 9% up on H1 2020

· Subscription revenues up 46% from same period last year

· Increasing diversification of customer base; Top five customers 43% of revenues in H1 2021 (H1 2020: 55%)

· Two new customer wins in recent weeks, making five in total this year

· Strong delivery and Cloud Hosting performance

· Continuing to invest in people and product for future growth

· High employee engagement

· Robust balance sheet position with £50m of cash and no debt

· Special Dividend of 10 pence per share (£30m) declared taking total dividends over 12 months to 26 pence and £77m

· Encouraging progress in converting late stage pipeline with TCV up by 30% since H1 2020 to £125m supported by our strategic accelerators

· ISS ESG Prime status awarded

Andrew Denton, Chief Executive Officer

"I am really pleased with the way that we have performed in the first half of 2021. We have continued to make progress across the Company, further developing our software, delivering for our customers and continuing to attract, retain, develop and support the smart, diverse people who underpin all we do.  Our success at converting the late stage pipeline and our strong delivery performance have led us to increase further our expectations for 2021, and we now expect to exceed previous market revenue estimates by circa 4%.  An encouraging early stage pipeline and strong growth in subscription revenues give us increased confidence in next year's performance.  Looking more strategically, we have made excellent progress in the key areas of subscription, Alfa Start and partnership as well as ensuring a continued focus on those technologies that have the potential to create step change for our customers."

Enquiries

Alfa Financial Software Holdings PLC	[phone]
Andrew Denton, Chief Executive Officer Duncan Magrath, Chief Financial Officer Andrew Page, Executive Chairman
Tulchan Communications LLP	[phone]
James Macey White Matt Low
Barclays	[phone]
Robert Mayhew Edward Hill
Investec	[phone]
Patrick Robb Sebastian Lawrence

Investor and analyst webcast

The Company will host a conference call today at 09:30am.  To obtain details for the conference call, please email [e-mail].  Please dial in at least 10 minutes prior to the start time.  

An archived webcast of the call will be available on the Investors page of the Company's website, https://investors.alfasystems.com/.

Notes to Editors

Alfa has been delivering software systems and consultancy services to the global asset and automotive finance industry since 1990.  Our best practice methodologies and specialised knowledge of asset finance facilitates delivery of large software implementations and highly complex business change projects.  With an excellent delivery track record spanning three decades, Alfa's experience and performance is unrivalled in the industry.

Alfa Systems, our class-leading technology platform, is at the heart of some of the world's largest asset finance companies. Key to the business case for each implementation is Alfa Systems' ability to replace multiple customer systems with our single platform. Alfa Systems supports both retail and corporate business for auto, equipment, wholesale and dealer finance on a multijurisdictional basis, including leases/loans, originations and servicing. An end-to-end solution with integrated workflow and automated processing using business rules, Alfa Systems provides compelling solutions to asset finance companies.

Alfa Systems is currently used by customers or has live implementations in 26 countries and Alfa has offices in Europe, Australasia and North America.  For more information, visit www.alfasystems.com.

Forward-looking statements

This Half Year Report (HYR) has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.  The HYR should not be relied on by any other party or for any other purpose.  This report contains certain forward-looking statements.  All statements other than statements of historical fact are forward-looking statements. These include statements regarding Alfa's intentions, beliefs or current expectations, and those of our officers, directors and employees, concerning (without limitation), with respect to the financial condition, results of operations, liquidity, prospects, growth, strategies and businesses of Alfa.  These statements and forecasts involve known and unknown risks, uncertainty and assumptions because they relate to events and depend upon circumstances that will or may occur in the future and should therefore be treated with caution.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.  These forward-looking statements are made only as at the date of this announcement.  Nothing in this announcement should be construed as a profit forecast.  Except as required by applicable law, Alfa disclaims any obligation or undertaking to update the forward-looking statements or to correct any inaccuracies therein, or to keep current any other information contained in the HYR. Accordingly, reliance should not be placed on any forward-looking statements.

BUSINESS REVIEW

Strong first half performance

The first half of 2021 has seen good progress across all parts of our business. We have continued to deliver successful implementations with increased usage of our scalable and reliable cloud hosting solution, at the same time as releasing significant enhancements to our software.  We have seen good growth in our contracted orders with Total Contracted Value ("TCV") up 11% since FY 2020 and we have also replenished and grown our pipeline which gives us good visibility of prospective work for 2022.  Importantly we have grown our headcount despite a tight labour market, and our strong pipeline has enabled us to remain fully utilised.  Importantly for the future we have kept attrition rates low and improved our employee engagement, which is now at 73%.

Financial performance in the first half has also been strong.  Revenue of £41.1m (2020 H1: £38.2m) was up 8% on last year. We have continued to reduce our dependency on key customers, with our top 5 customers representing 43% of our revenues in H1 2021, compared with 55% in H1 2020 and 64% in H1 2019.  We had thirteen customers contributing revenues of more than £1m in the period, up from ten in H1 2020 and seven in H1 2019.  Average headcount in the period was 375 (2020 H1: 322) a 16% increase, which drove higher salary costs.  Hosting costs also grew as that business increased over the same period last year.  Both of these were partially offset by a full six months of reduced travel and office costs compared with H1 2020.  The overall revenue increase of £2.9m was partially offset by increased costs of £1.9m resulting in Operating Profit up £1.0m to £11.4m (2020 H1: £10.4m). Cash conversion was strong at 138% and we finished the period with net cash of £50.0m (31 Dec 2020: £37.0m).

We were also delighted on 28 June 2021, to achieve an ISS ESG "Prime" rating. ISS ESG takes an absolute best-in-class approach by industry, so companies are categorized as "Prime" if they achieve/exceed the sustainability performance requirements (the "Prime threshold") defined by ISS ESG for each specific industry in the ESG Corporate Rating. 

Subscription

Subscription is the fastest growing element of our revenues and comprises any revenues that are recurring including monthly or annual maintenance billing, cloud hosting services and bundled licence, maintenance and hosting contracts. We now have a Cloud First approach to our sales approach as we see real benefits in the speed of implementation for customers and the reliability of the service and built-in tools, including automated monitoring, patching and scheduling, that our hosting service provides.  We anticipate that the majority of new customers will take a hosted service and all of the current v4 to v5 upgrades are moving into a hosted v5 environment. In addition we expect that new customers will increasingly take bundled licence, hosting and maintenance contracts.  We now have five customers taking Cloud Hosting services for live production environments and have eight customers taking hosting services during design and implementation, most of which will become live production customers, to give a total of thirteen customers taking hosting services up from ten at the end of 2020. 

The number of customers with ongoing maintenance contracts has increased to twenty-eight from twenty-two at the end of 2020. 

Software

Our strategy is to continue to develop our software, to ensure that we meet customer needs as they evolve and as the regulatory environment changes.  We release a new update of Alfa every 4 weeks, each one of which makes available to customers enhancements that maintain our edge as a leading provider of asset finance software. 

During 2021 we have significantly advanced our ability to service wholesale customers which is a new market for Alfa.  These enhancements allow support for all asset types, speedier access to funds for wholesale customers while tracking and managing contracts through the early stages, and allowing for bulk changes to wholesale contract curtailment schedules.  We now have two customers using our wholesale functionality and one of our major contract wins in the first half was for a wholesale only customer.

We have also delivered improvements in the areas of credit decisioning, business rule creation and regulatory support for European markets. 

The new user interface (UI) that we launched last year is now in production with eight customers and these new UI approaches have been used to develop collections and curtailments functionality. 

Overall software revenue reduced compared with last year due to the reduction in brand new Alfa implementations and consequently a reduction in licence income, although this was partially offset by increased development days for existing customers, including those upgrading from Alfa Systems v4 to v5.

Services

Services revenues are derived from all of the work on implementations and other services but excludes development days on new and existing customers (which is shown in Software).  We have continued to deliver a very high level of service to customers, whilst operating 100% remotely during the period.  In the first six months of 2021 we saw go-lives on a UK Alfa Start project, a UK v4 to v5 upgrade, the continuation of a multi-country implementation across a further four European countries, implementing for new business following the acquisition of a company and the launch of three new modules for an existing customer.

We have grown our customer-serving team, however a greater proportion of their time was spent on software development which shows in Software and so the Services days remained relatively constant. Within services there was a reduction in new implementation work, offset by the implementation of v4 to v5 upgrades.

We have also grown our access to partner resources and in the first half of the year we had partners operating with us for seven customers, which is up from four customers for the same period last year.  Overall days were down, although if we exclude the Systems Integration work done by a partner on one large pre-implementation project last year which did not move to the implementation stage, total partner days were up circa 15%.

Alfa iQ - putting theory into practice

We have made good progress in demonstrating the potential of Alfa iQ and the improvements that can be made to customers' return on capital while building the processes and structures to support live projects.  We have also produced three white papers challenging traditional thinking in the industry. Up until now Alfa iQ has relied on using resources from Alfa and Bitfount, the joint venture partners, however we have now recruited our first two external new hires.  In the period Alfa iQ achieved ISO 27001 certification.  We remain on track to start generating revenue from the business in 2022.

Strong engagement with our people

We made a decision at the start of the year to give a degree of certainty to our people in uncertain times, and so stated that we would not be asking anyone to return to our offices before September.  We have however recognised that for some people it was important for them to be able to work away from their home environment, and so as soon as it was safe to do so we opened our offices for those who wanted to work there.  Over the next few months we will encourage people to try working back in the office for at least some of the week, and intend to implement "Smart Working" from January 2022.  This will not be a one-size fits all approach, but will combine hybrid office/home working along with some remote working to provide the best working environment to retain and attract the best people.  We have continued to arrange remote events to keep engagement high ranging from short presentations on work and life topics through to Company-wide hackathons, innovation days and conferences. 

Engagement and retention has remained high, and we continue to be able to attract high quality diverse people to Alfa, however we recognise that the market remains tight for quality software engineers and so we work hard to ensure that we are the employer of choice.  With this in mind, we have a very full agenda in our global HR function, where activity has included updating our approach to onboarding and to learning and development as well as an ongoing review of rewards and benefits.  Employee share ownership has always been important to Alfa and we're introducing a Save as You Earn (SAYE) share scheme in the UK and an Employee Stock Purchase Plan (ESPP) share scheme in the US in the coming months.

Capital return

We remain a strongly cash generative business and our cash balances continued to grow during the period.  We continuously review our strategy and assess the funds needed to pursue that strategy and then review the options for any excess funds.  When presenting our 2020 results we committed to starting a program of regular dividends, and we remain committed to doing this through the declaration of a single ordinary dividend each year alongside our full year results.  Despite the payment of a regular dividend, we expect to continue to generate excess cash and so from time to time will also look to return any excess cash.  Having made an assessment of our potential investment needs and reviewing our internal forecasts for the next 12-18 months we have declared a Special Dividend of 10 pence per share, for a total payment of £30m.  This will still leave Alfa with a strong balance sheet position, but will have generated total dividends for shareholders over the last 12 months to 26 pence per share or £77m.

Favourable market conditions

While the underlying asset finance market did initially see a dip in activity following widespread Covid-19 lockdowns, it has broadly been recovering during H2 2020 and continued to do so through H1 2021 and we now see favourable market conditions.  Regarding the asset finance software market, since the initial disruption of the uncertainty caused by Covid-19 in H1 2020, we have seen no adverse impact on our market. Indeed, the remote working that companies have been forced to adopt, and are increasingly looking to be standard practice going forwards, has accelerated moves towards a digital strategy, alongside increasing regulatory push factors, both of which Alfa is well positioned to benefit from.

Good conversion of late stage pipeline

When we announced our 2020 results we had a strong late-stage pipeline, but highlighted the importance of converting this into signed contracts and that converting prospects into signed contracts was taking longer than normal.  We announced in July that we had converted three of these prospects into wins, and in recent weeks we have converted two more.  We still have not lost any customers out of the late stage pipeline and this strong conversion demonstrates that we have a compelling proposition.  This of course is backed up by our very strong delivery record.  We do however still see that getting to signed licence contracts is taking longer than a few years ago, although this is offset by the increasing trend towards Minimum Viable Product (MVP) solutions, which have the advantage of getting us on the ground faster, although long term security takes longer to achieve.

Early stage pipeline looking promising

As we noted above we believe the pandemic has accelerated companies' thinking about the risks they take in running legacy software platforms. We see many situations where companies are running old on-premise equipment and there is a clear opportunity for them to adopt more resilient and reliable cloud-based systems with greater functionality. Other trends in the industry include moves towards banking as a service, direct and hybrid sales, and an emphasis on the importance of the customer journey. We have developed a powerful and compelling proposition to make the most of these industry trends.  We now have visibility of a number of prospects that, whilst at a very early stage, show how we can replenish and continue to grow our pipeline.

Outlook 

Total revenues in 2020 were £78.9m, with underlying revenues of £73.3m once £5.6m of one-off licence income is removed. Our success at converting the late stage pipeline and our strong delivery performance have led us to further increase our expectations for 2021, and we now expect to exceed previous market revenue estimates by circa 4%, which would represent healthy growth over 2020 underlying revenues, despite the adverse impact of currency.

 

FINANCIAL REVIEW

Financial Results

				H1 2021	H1 2020	Movement
£'000s	Unaudited				Unaudited	%
Revenue		41,096			38,174	8%
Operating expenses - net			(29,728)		(27,787)	7%
Operating profit			11,368		10,387	9%
Share of results of associates and joint ventures			(24)		(1)	n/a
Finance income		28			75	(62%)
Finance expense		(369)			(408)	(9%)
Profit before tax		11,003			10,053	9%
Taxation		(2,195)			(2,222)	(1%)
Profit for the period		8,808			7,831	12%

Revenues increased by 8% or £2.9m to £41.1m in the six months ended 30 June 2021 (H1 2020: £38.2m).  Growth at constant currency was 12%.

Operating profit increased by £1.0m to £11.4m (H1 2020: £10.4m), due to the £2.9m increase in revenues, partially offset by £1.9m increase in expenses, principally due to a £2.2m increase in salary costs from pay rises and increased headcount.

Net finance costs which relate to leases expense of £0.3m (H1 2020: £0.3m) resulted in profit before tax of £11.0m (H1 2020: £10.1m).  The Effective Tax Rate ("ETR") for the 2021 half year is 19.9% (H1 2020:  22.1%).  For the full year 2021 we expect the ETR to be around 18% (2020: 12.4%), with this increase reflecting that the prior year benefited from R&D tax relief for the two years 2018 and 2019, whereas the current year will reflect the R&D tax relief for 2020 only, the resulting profit for the period was £8.8m (H1 2020: £7.8m). 

Revenue

Revenue - by type	H1 2021	H1 2020	Movement
£'000s	Unaudited	Unaudited (*restated)	%
Subscription*	11,353	7,752	46%
Software*	6,413	7,937	(19%)
Services*	23,330	22,485	4%
Total revenue	41,096	38,174	8%

*To better reflect the nature and type of revenue, changes have been made to the classification and allocation of revenue line items.  The comparative disclosures for the June 2020 reporting period have also been amended to reflect a fair base for comparability.  These changes have had no impact on the total revenue or the profit before tax that were disclosed at the end of June 2020. Software revenues include revenues from recognition of customised licence revenue, one-off licence fees and any development revenues.  Subscription revenues include recurring revenues paid on a monthly or annual basis, including subscription licence revenues, maintenance and cloud hosting.  Services revenues are revenues from any work done for customers including pre-implementation, implementation work, and ongoing services, but excludes any revenue from development work.

Subscription revenues

Overall subscription revenues increased 46% to £11.4m (2020 H1: £7.8m).  The increase was driven by a 14% increase in maintenance revenues up from £7.0m to £8.0m, along with a five-fold increase in hosting and bundled subscription revenues over the same period last year.  In total 13 customers are now taking bundled or hosting only contracts.  We anticipate that the majority of new customers will take a hosted service and all of the current v4 to v5 upgrades are moving into a hosted v5 environment.

The number of customers with ongoing maintenance contracts has increased to 28 from 22 at the end of 2020. 

Software revenues

Software revenues of £6.4m were down £1.5m or 19% on last year (H1 2020: £7.9m).  As previously discussed more of our implementation work this year has been for v4 to v5 upgrades, which generally do not attract additional licence payments, except where customers take on additional modules and so the income from customised licences was lower.  This was partially offset by income from increased development work for new customers, including those going through v4 to v5 upgrades.

Services revenues

Total Services revenue increased by 4% to £23.3m (H1 2020: £22.5m) at actual exchange rates.  There was a reduction in pre-implementation revenues, where last year we had two large customers requiring detailed pre-implementation work.  Overall implementation revenues were largely unchanged, although as previously described a lot of the activity was for upgrades as opposed to new implementations.  There was however an increase in ongoing services work for existing customers.

Total Contracted Value (TCV)

TCV - by type (unaudited)				2021	2020
£'m				H1	FY
Subscription				77.2	69.1
Software				18.8	12.8
Services				29.2	31.0
Total TCV				125.2	112.9

Definition of TCV is included in the definition section of this Half Year Report

Total contracted value (TCV) increased over the first six months of the year by 11% to £125.2m as at 30 June 2021 (31 December 2020: £112.9m, 30 June 2020: £96.4m). As expected the Subscription TCV has increased 12% as the number of customers has increased, and there was also an increase in Software, from secured development work and licences from the contracts that were won in the period.  Of the TCV at 30 June 2021, £55.7m (H2 2020: £52.3m) is anticipated to convert into revenue within the next 12 months, assuming contracts continue as expected and are not cancelled or delayed.  This includes £10.2m (H2 2020: £6.1m) of Software revenues, £24.0m (H2 2020: £22.4m) of Subscription revenues and £21.5m (H2 2020: £23.8m) of Services revenues.

Operating profit

The Group's operating profit increased by £1.0m, or 9%, to £11.4m in H1 2021 (H1 2020: £10.4m) primarily reflecting the £2.9m increase in revenues, partially offset by an increase in the Group's cost base as we continued to invest in the business, through increased headcount although this was partially offset by reduced partners costs which were high in H1 2020 due to one large pre-implementation project.  The Group's operating profit on a constant currency basis increased by 22%.

Headcount numbers were up 14% at 30 June 2021 at 389 (H1 2020: 340), and our staff retention rate has been 94% over the 12 months up to that date.

Expenses - net	H1 2021		H1 2020	Movement
£'000s	Unaudited		Unaudited (restated)	%
Cost of sales*		14,981	14,138	6%
Sales, general and administrative expenses*		14,995	13,914	8%
Other income		(248)	(265)	(7%)
Total expenses - net		29,728	27,787	7%

*To better reflect the nature and function of certain expenses, changes have been made to the classification and allocation of expense line items.  The comparative disclosures for the June 2020 reporting period have also been amended to reflect a fair base for comparability.  The main expense items affected by this reclassification were salary costs and computer costs.  These changes have had no impact on the total expenses or the profit before tax that were disclosed at the end of June 2020.

Cost of sales increased by £0.9m to £15.0m (2020: £14.1m) due to higher salary costs from the increase in customer facing headcount along with increased hosting costs.

Sales, general and administrative (SG&A) expenses increased by £1.1m to £15.0m in the six month period to 30 June 2021 (H1 2020: £13.9m).  This included increased salary costs through higher headcount although this was somewhat offset by the reduction in contractor costs.  In addition Profit Share Pay increased to £1.3m (2020 H1: £0.9m) along with increases in the share-based payment charges in H1 2021 to £0.7m (H1 2020: £0.5m), there has also been an increase in foreign currency differences of £0.7m, which moved from a gain of £0.4m in H1 2020 to a loss of £0.3m in H1 2021.  The above factors were offset by a further reduction on travel and conference costs, as there was almost no travel for the whole six month period.

Finance costs

Net finance costs which relate to leases of £0.3m (H1 2020: £0.3m) remained relatively unchanged.  Income on cash balances remained low given the current low interest rate environment.

Profit for the period

Profit after taxation increased by £1.0m, or 12%, to £8.8m in H1 2021 (H1 2020: £7.8m).  The Effective Tax Rate ("ETR") for the 2021 half year is 19.9% (H1 2020:  22.1%).  For the full year 2021 we expect the ETR to be around 18% (2020: 12.4%), with this increase reflecting that the prior year benefited from R&D tax relief for the two years 2018 and 2019, whereas the current year will reflect the R&D tax relief for 2020 only.

Earnings per share

Basic earnings per share increased by 11% to 2.98 pence in H1 2021 (H1 2020: 2.68 pence). Diluted earnings per share increased by 12% to 2.93 pence (H1 2020: 2.62 pence).

Cash flow

Net cash (including the effect of exchange rate changes) increased by £13.0m to £50.0m at 30 June 2021, from £37.0m at 31 December 2020.  This increase has been driven by cash generated from operations, annual maintenance payments received in the period, and continued focus on cash management by the Group.  Taken together, this resulted in the Group's Operating Free Cash Flow Conversion (FCF) of 138% (H1 2020: 108%). This is a very strong result and higher than our ongoing trend which will be closer to 100% conversion.

In addition to an increase in cash generated from operations of £17.2m, the Group incurred £0.6m on capital expenditure (H1 2020: £0.6m) and received net tax repayments of £0.3m (H1 2020: paid £1.4m) including the research and development tax credit claim during the period, which was why there was an unusually low effective tax rate for FY 2020. The Group has no external bank borrowings.

In the six months ended 30 June 2021, net cash outflows of £3.5m (H1 2020: £0.8m) from financing activities related to the principal element of lease payments and funding the Employment Benefit Trust for the purchase of shares to satisfy current and future LTIP vestings, avoiding potential dilution. 

No ordinary dividends have been paid in the six months ended 30 June 2021 (the 2020 final dividend of £3.0m had a record date of 11 June 2021 and was paid on 2 July 2021).  The Board have declared a 10 pence per share Special dividend, amounting to £30m, payable on 5 November 2021 with a record date of 8 October 2021 and an ex-dividend date of 7 October 2021.

Balance sheet

The significant movements in the Group's balance sheet, aside from the cash balance which is described above, from 31 December 2020 to 30 June 2021 are detailed below.

The trade and other receivables balance increased by £5.3m to £19.0m at 30 June 2021 (31 December 2020: £13.7m) as a result of higher billings due to the overall increased revenue during H1 2021 including the impact of the annual maintenance billing in May. 

The trade and other payables balance increased by £4.4m to £12.5m at 30 June 2021 (31 December 2020: £8.1m) principally due to the dividend payable of £3.0m on 2 July 2021 and an increase in the holiday pay accrual of £0.7m reflecting the seasonality of fewer holidays being taken in the first half of the year.

Contract liabilities increased by £7.9m to £14.9m at 30 June 2021 (31 December 2020: £7.0m) reflecting the fact that the majority of annual maintenance contracts run on a 1 May - 30 April period and as such a larger proportion of the annual amount is deferred at 30 June compared with 31 December. 

Subsequent events

In the period since 30 June 2021, there have been no material subsequent events.

Related parties

Details about related party transactions are disclosed in note 16.
 

PRINCIPAL RISKS AND UNCERTAINTIES

Principal risks and uncertainties which could have a material impact on the long-term performance of Alfa Financial Software Holdings PLC and its subsidiaries were set out in the Alfa Financial Software Holdings PLC Annual Report for the year ended 31 December 2020, dated 22 March 2021, and remain valid at the date of this report.

Those risks and uncertainties at the date of this report where the impact continues to be assessed as "Major" and where the probability of the event is assessed as at least "Possible" were:

· Socio-economic and geo-political risk - the potential impacts from Covid-19 on the macro-economic environment leading to global and local recessions. The previously identified potential impacts following the end of the Brexit transition period have reduced;

· IT security and cyber risks - a targeted attack could adversely affect our customers' or potential customers' perception of Alfa Systems and could impact our ability to operate our business;

· High customer concentration - we have significant customer concentration risk due to the size and duration of our software implementation projects.

In addition and in light of the Covid-19 pandemic, the following risk is highlighted. This was included in the 2020 Annual Report with the impact being assessed as "Moderate" and where the probability of the event as being assessed as "Likely". Since the Annual Report, the likelihood of this risk's identified impacts has been reduced and reassessed as "Possible":

· Pandemic outbreak in Alfa and/or customer geographies - may impact the health of our people, may continue to cause economic disruption, and hinder the movement of our people to our offices or those of the customer.

In addition, the following risk has been reassessed to have an increased probability, moving from "Unlikely" to "Possible", still with an impact of "Major":

· Risk to people, skills, location and working environment - we are seeing increased competition for talent, and there is an increased risk that this will impact our recruitment and retention.

UNAUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2021

£'000s	Note	H1 2021 Unaudited	H1 2020 Unaudited (restated)
Revenue	3	41,096	38,174
Cost of sales*		(14,981)	(14,138)
Gross profit		26,115	24,036
Sales, general and administrative expenses*		(14,995)	(13,914)
Other operating income		248	265
Operating profit	4	11,368	10,387
Share of results of associates and joint ventures		(24)	(1)
Profit before net finance costs and tax		11,344	10,386
Finance income		28	75
Finance costs		(369)	(408)
Profit before tax		11,003	10,053
Tax expense	6	(2,195)	(2,222)
Profit for the period attributable to owners of the parent		8,808	7,831
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation of foreign operations		(84)	810
Total comprehensive income, net of tax		(84)	810
Total comprehensive income for the period attributable to owners of the parent		8,724	8,641
Earnings per share (in pence)
Basic		2.98	2.68
Diluted		2.93	2.62

*To better reflect the nature and function of certain expenses, changes have been made to the classification and allocation of expense line items.  The comparative disclosures for the June 2020 reporting period have also been amended to reflect a fair base for comparability.  The main expense items affected by this reclassification were salary costs and computer costs.  These changes have had no impact on the total expenses or the profit before tax that were disclosed at the end of June 2020.

The consolidated statement of profit or loss and comprehensive income should be read in conjunction with the accompanying notes.

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

£'000s	Note	30 June  2021 Unaudited	31 Dec 2020 Audited
Assets
Non-current assets
Goodwill	7	24,737	24,737
Other intangible assets	8	2,218	2,153
Property, plant and equipment	9	803	885
Right-of-use assets	10	14,097	14,841
Deferred tax assets		848	1,794
Interests in joint ventures		377	394
Total non-current assets		43,080	44,804
Current assets
Trade and other receivables	11	19,006	13,668
Cash and cash equivalents		49,986	37,020
Total current assets		68,992	50,688
Total assets		112,072	95,492
Liabilities and equity
Current liabilities
Trade and other payables	12	12,466	8,120
Corporation tax	12	3,175	1,266
Lease liabilities	13	1,770	1,701
Contract liabilities	3d	14,863	6,994
Total current liabilities		32,274	18,081
Non-current liabilities
Lease liabilities	13	14,980	15,790
Provisions for other liabilities		1,191	1,392
Total non-current liabilities		16,171	17,182
Total liabilities		48,445	35,263
Capital and reserves
Share capital		300	300
Translation reserve		7	91
Own shares	14	(1,450)	-
Retained earnings		64,770	59,838
Total equity		63,627	60,229
Total liabilities and equity		112,072	95,492

The consolidated statement of financial position should be read in conjunction with the accompanying notes.

 

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2021

£'000s	Notes	Share  capital	Own shares	Translation reserve	Retained earnings	Equity attributable to owners of the parent
Balance as at 1 January 2020		300	-	26	82,017	82,343
Profit for the financial period		-	-	-	7,831	7,831
Other comprehensive income		-	-	810	-	810
Total comprehensive income for the period		-	-	810	7,831	8,641
Equity settled share-based payment schemes		-	-	-	539	539
Balance as at 30 June 2020		300	-	836	90,387	91,523
Balance as at 1 January 2021		300	-	91	59,838	60,229
Profit for the financial period		-	-	-	8,808	8,808
Other comprehensive income		-	-	(84)	-	(84)
Total comprehensive income for the period		-	-	(84)	8,808	8,724
Equity settled share-based payment schemes		-	-	-	670	670
Equity settled share-based payment schemes - deferred tax impact		-	-	-	(369)	(369)
Dividend payable					(2,986)	(2,986)
Own shares distributed	14	-	1,191	-	(1,191)	-
Own shares purchased	14	-	(2,641)	-	-	(2,641)
Balance as at 30 June 2021		300	(1,450)	7	64,770	63,627

The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2021

£'000s	Note	H1 2021 Unaudited	H1 2020 Unaudited
Operating profit		11,368	10,387
Adjustments:
Depreciation		1,079	1,153
Amortisation		374	384
Share-based payment charge		670	539
Movement in provisions		(201)	(309)
Movement in contract liabilities		7,869	3,505
Movement in working capital:
Movement in trade and other receivables		(5,347)	(6,219)
Movement in trade and other payables (excluding contract liabilities)		1,357	3,232
Cash generated from operations		17,169	12,672
Interest paid		-	(6)
Interest element on lease payments		(369)	(402)
Income taxes received / (paid)		295	(1,431)
Net cash generated from operating activities		17,095	10,833
Cash flows from investing activities
Purchases of property, plant and equipment	9	(124)	(173)
Purchase of computer software	8	(2)	(29)
Payments for internally developed software	8	(437)	(399)
Loss on disposal of computer software and property, plant and equipment	9	2	38
Interest received		28	75
Investment in joint venture		-	(401)
Net cash (used in) investing activities		(533)	(889)
Cash flows from financing activities
Principal element of lease payments	13	(881)	(846)
Purchase of own shares	14	(2,641)	-
Net cash (used in) financing activities		(3,522)	(846)
Net increase in cash and cash equivalents		13,040	9,098
Cash and cash equivalents at the beginning of the period		37,020	58,839
Effect of foreign exchange rate changes on cash and cash equivalents		(74)	697
Cash and cash equivalents at the end of the period		49,986	68,634

The consolidated cash flow statement should be read in conjunction with the accompanying notes.

Notes to the Condensed Consolidated Half Year Financial Statements for the six months ended 30 June 2021

1.  General information

Alfa Financial Software Holdings PLC ("Alfa" or the "Company") is a public company limited by shares and is incorporated and domiciled in England. Its registered office is at Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, United Kingdom.  Alfa's registration number is 10713517.

The principal activity of the Company and its subsidiaries (the "Group") is to provide software solutions and consultancy services to the asset finance industry in the United Kingdom, United States of America, Europe and Asia Pacific.

These unaudited Half Year Financial Statements have been approved for issue by the Board of Directors on 21 September 2021.  These Half Year Financial Statements have been reviewed but not audited.

2. Accounting policies

2(a) Basis of preparation

The Half Year Financial Statements have been prepared in accordance with IAS 34 "Half Year Financial Reporting" as contained in UK-adopted International Accounting Standards and the Disclosure and Transparency Rules of the Financial Conduct Authority.

These Half Year Financial Statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Accordingly this report should be read in conjunction with the annual report for the year ended 31 December 2020 (the "Annual Financial Statements") which was prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and any public announcements made by Alfa during the Half Year reporting period. The Annual Financial Statements constitute statutory accounts as defined in section 434 of the Companies Act 2006 and a copy these statutory accounts has been delivered to the Registrar of Companies. The auditor's report on the Annual Financial Statements was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The accounting policies adopted in the preparation of the Half Year Financial Statements are consistent with those used to prepare Alfa's consolidated financial statements for the year ended 31 December 2020 and the corresponding Half Year reporting period, with the exception of Own Shares refer to note 2(d).

The preparation of the Half Year Financial Statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates. In preparing these Half Year Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated Annual Financial Statements described above. 

The Half Year Financial Statements have been prepared on a going concern basis, under the historical cost convention.

2(b) Going concern

The financial statements are prepared on the going concern basis. The Group continues to be cash-generative and the Directors believe that the Group has a resilient business model. The Group meets its day-to-day working capital requirements through its cash reserves generated from operating activities. The Group's forecasts and projections, taking account of planned dividend payments and reasonably possible changes in trading performance including the possible impacts of Covid-19, show that the Group has sufficient cash reserves to operate for a period of not less than 12 months.

The going concern assessment performed also includes downside stress testing in line with FRC guidance which demonstrates that even in the most extreme downside conditions considered reasonably possible, given the existing level of cash held, the Group would continue to be able to meet its obligations as they fall due, without the need for substantive mitigating actions and taking account of planned dividend payments. 

2(c) Changes in accounting policies

The Group has not adopted any new accounting standards in the period. Other changes to accounting standards in the year had no material impact.

2(d) Own shares accounting policy

The Group has adopted an Accounting Policy with respect to Own shares which are shares held by Alfa and are disclosed as Own shares and deducted from equity.

Shares issued by the trust to employees are purchased on the market prior to issue.  Shares held by the trust and not yet issued to employees at the end of the reporting period are shown as Own shares in the financial statements.  See Note 14.

2(e) Seasonality

The Group is not normally significantly influenced by seasonality or cyclical fluctuation because the Group's revenues are relatively consistent throughout the year. The Group's revenue is also influenced by the number and maturity of software implementations during the period.  Separately, the Group's cash flows are subject to seasonal fluctuations because (i) the Group invoices a large proportion of its customers for maintenance annually in advance in the first six months of each year, resulting in a higher inflow of cash receipts in the first half of the Group's financial year in respect of maintenance revenues and (ii) cash flows are impacted by the invoicing of up-front customer licence fees at the commencement of an implementation.

2(f) Foreign currency

The following exchange rates were used in the financial statements:

						USD	Euro	AUD	NZD
	Average rate 6 months to:
			30 June 2021			1.39	1.15	1.80	1.94
			30 June 2020			1.26	1.14	1.92	2.01
	Closing rate:
			30 June 2021			1.38	1.16	1.84	1.98
			31 Dec 2020			1.37	1.11	1.77	1.89

3.  Segment information and revenue from contracts with customers

Operating and reporting segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM") and the 31 December 2020 annual report.  The CODM considers the business from a product perspective and, therefore, recognises one operating and reporting segment, being the sale of software and related services.  The Group therefore presents revenue segmentation by type of project and consolidated earnings, as presented to the CODM, along with the required entity wide disclosure.

3(a) Revenue by stream

The Group assesses revenue project streams, being Subscription, Software and Services, as summarised below:

£'000s	H1 2021 Unaudited	H1 2020 Unaudited (restated*)
Subscription*	11,353	7,752
Software*	6,413	7,937
Services*	23,330	22,485
Total revenue	41,096	38,174

*To better reflect the nature and type of revenue, changes have been made to the classification and allocation of revenue line items.  The comparative disclosures for the June 2020 reporting period have also been amended to reflect a fair base for comparability.  These changes have had no impact on the total revenue or the profit before tax that were disclosed at the end of June 2020. Software revenues include revenues from recognition of customised licence revenue, one-off licence fees and any development revenues.  Subscription revenues include recurring revenues paid on a monthly or annual basis, including subscription licence revenues, maintenance and cloud hosting.  Services revenues are revenues from any work done for customers including pre-implementation, implementation work, and ongoing services, but excludes any revenue from development work.

3(b) Revenue by geography

Revenue attributable to each geographical market based on where the customer mainly utilises its instance of Alfa, or where the service is rendered, is as follows:

£'000s	H1 2021 Unaudited	H1 2020 Unaudited
UK	14,911	8,658
US	15,016	15,763
Rest of EMEA (excl UK)	8,940	12,637
Rest of the World	2,229	1,116
Total revenue	41,096	38,174

3(c) Revenue by currency

Revenue by contractual currency is as follows:

£'000s	H1 2021 Unaudited	H1 2020 Unaudited
GBP	18,657	12,607
USD	15,431	16,364
EUR	4,779	8,087
Other	2,229	1,116
Total revenue	41,096	38,174

3(d) Liabilities from contracts with customers

£'000s	H1 2021 Unaudited	H1 2020 Unaudited
Contract liabilities - deferred licence	5,539	3,115
Contract liabilities - deferred maintenance	9,324	8,943
Total contract liabilities	14,863	12,058

3(e) Timing of revenue

Timing of revenue - the Group derives revenue from the transfer of goods and services as follows over time and at a point in time in the following revenue segments:

H1 2021 - £'000s	Subscription	Software	Services	Total revenue
At a point in time - time and materials	-	3,269	12,506	15,775
At a point in time - fixed price	2,808	769	-	3,277
Over time - time and materials	-	1,486	9,825	11,311
Over time - fixed price	8,545	889	999	10,733
Total revenue	11,353	6,413	23,330	41,096

H1 2020 - £'000s (restated)	Subscription	Software	Services	Total revenue
At a point in time - time and materials	-	2,324	9,302	11,626
At a point in time - fixed price	936	-	233	1,169
Over time - time and materials	-	5,047	10,686	15,733
Over time - fixed price	6,816	566	2,264	9,646
Total revenue	7,752	7,937	22,485	38,174

4.  Operating profit

The following items have been included in arriving at operating profit in the table below: 

'000s	H1 2021 Unaudited	H1 2020 Unaudited (restated)
Research and development costs*	726	709
Depreciation of property, plant and equipment	200	276
Depreciation of right-of-use lease assets	879	877
Amortisation of intangible assets	374	384
Share-based payments	670	539
*To better reflect the nature of research and development expenditure and align with capitalised development costs, changes have been made to the classification of expense line items.  The comparative disclosures for the June 2020 reporting period have also been amended to reflect a fair base for comparability.

5.  Employee costs

'000s	H1 2021 Unaudited	H1 2020 Unaudited
Salaries, wages and social security contributions	17,828	16,456
Pension costs	1,977	1,726
Profit share pay	1,320	890
Share-based payments	670	539
Total employment costs	21,795	19,611
Average monthly number of people employed (including Directors)	H1 2021 Unaudited	H1 2020 Unaudited
UK	277	239
US	71	63
Rest of the World	27	20
Total average monthly number of people employed	375	322

At 30 June 2021 the Group had 389 employees (30 June 2020: 340).

6.  Income tax expense

Income tax expense is calculated on management's best estimate of the full financial year expected tax rate, which is then adjusted for discrete items occurring in the reporting period.  The income tax expense for the six-month period ended 30 June 2021 was £2.2m (H1 2020: £2.2m).  The Effective Tax Rate ("ETR") for the 2021 half year is 19.9% (H1 2020:  22.1%).  For the full year 2021 we expect the ETR to be around 18% (2020: 12.4%), with this increase reflecting that the prior year benefited from R&D tax relief for the two years 2018 and 2019, whereas the current year will reflect the R&D tax relief for 2020 only.

7. Goodwill 

Goodwill arose on the acquisition of subsidiaries in 2012 as part of a group reorganisation and represents the excess of the consideration transferred and the amount of any non-controlling interest in the investment over the fair value of the identifiable assets acquired and the liabilities and contingent liabilities assumed.

We have assessed whether there are any indicators of possible impairment of goodwill.  Considering, in particular the fact that we have experienced strong trading performance during the six month period along with the carrying value of the assets for the Company remaining significantly below the market capitalisation of the Company, we found no indicators of possible impairment of goodwill.  As a consequence no formal goodwill impairment test has been carried out.

8. Other intangible assets 

£'000s	Computer software	Internally generated software		Total
Cost
At 1 January 2020	1,394	1,542	2,936
Additions	29	399	428
Disposals	(57)	-	(57)
At 30 June 2020	1,366	1,941	3,307
Depreciation
At 1 January 2020	528	153	681
Charge for the period	173	211	384
Elimination on disposals	(29)	-	(29)
At 30 June 2020	672	364	1,036
Net book value
At 30 June 2020	694	1,577	2,271
Cost
At 1 January 2021	1,455	2,192	3,647
Additions	2	437	439
Disposals	-	-	-
At 30 June 2021	1,457	2,629	4,086
Depreciation
At 1 January 2021	820	674	1,494
Charge for the period	41	333	374
Elimination on disposals	-	-	-
At 30 June 2021	861	1,007	1,868
Net book value
At 30 June 2021	596	1,622	2,218

9.  Property, plant and equipment

£'000s	Fixtures and fittings	IT equipment	Motor vehicles	Total
Cost
At 1 January 2020	1,218	3,177	40	4,435
Additions	37	136	-	173
Disposals	(1)	(40)	(40)	(81)
Foreign exchange	10	37	-	47
At 30 June 2020	1,264	3,310	-	4,574
Depreciation
At 1 January 2020	654	2,575	40	3,269
Charge for the period	55	221	-	276
Eliminated on disposal	-	(31)	(40)	(71)
Foreign exchange	10	31	-	41
At 30 June 2020	719	2,796	-	3,515
Net book value
At 30 June 2020	545	514	-	1,059
Cost
At 1 January 2021	1,202	3,282	-	4,484
Additions	3	121	-	124
Disposals	-	(29)	-	(29)
Foreign exchange	4	(116)	-	(112)
At 30 June 2021	1,209	3,258	-	4,467
Depreciation
At 1 January 2021	719	2,880	-	3,599
Charge for the period	58	142	-	200
Eliminated on disposal	-	(27)	-	(27)
Foreign exchange	4	(112)	-	(108)
At 30 June 2021	781	2,883	-	3,664
Net book value
At 30 June 2021	428	375	-	803

10.  Right-of-use lease assets

£'000s	Motor Vehicles	Property	Total
Cost
At 1 January 2020	212	17,905	18,117
Additions	78	-	78
Foreign exchange	10	5	15
At 30 June 2020	300	17,910	18,210
Depreciation
At 1 January 2020	67	1,648	1,715
Charge for the period	51	826	877
Foreign exchange	5	6	11
At 30 June 2020	123	2,480	2,603
Net book value
At 30 June 2020	177	15,430	15,607
Cost
At 1 January 2021	273	17,925	18,198
Additions	86	53	139
Foreign exchange	-	(6)	(6)
At 30 June 2021	359	17,972	18,331
Depreciation
At 1 January 2021	111	3,246	3,357
Charge for the period	55	824	879
Foreign exchange	-	(2)	(2)
At 30 June 2021	166	4,068	4,234
Net book value
At 30 June 2021	193	13,904	14,097

11 Trade and other receivables

The Group holds the following trade and other receivables:

£'000s		H1 2021 Unaudited	FY 2020 Audited
Trade receivables		8,707	5,812
Other receivables		10,299	7,856
Total trade and other receivables		19,006	13,668

During the six months ended 30 June 2021, the provision for losses was £nil (H1 2020: £nil).

11 (a) Trade receivables ageing

Ageing of net trade receivables £'000s	H1 2021 Unaudited	FY 2020 Audited
Within agreed terms	7,248	5,592
Past due 1-30 days	1,204	86
Past due 31-90 days	-	-
Past due 91+ days	255	134
Trade receivables - net	8,707	5,812

The Group believes that the unimpaired amounts that are past due are fully recoverable as there are no indicators of future delinquency or potential litigation.  At 31 August 2021, of the £0.3m trade receivables past due 91+days at 30 June 2021, the total related to a single invoice that remains outstanding.

11 (b) Other receivables

£'000s	H1 2021 Unaudited	FY 2020 Audited
Accrued income	8,296	4,992
Prepayments	1,861	2,065
Other receivables	142	799
Total other receivables	10,299	7,856

Accrued income represents fees earned, but not invoiced, at the reporting date, which have no right of offset with contract liabilities - deferred licence amounts.  Accrued income increased by £3.3m since last year-end due to higher accrued income on Subscription revenue of £1.3m and Services revenue of £1.5m. 

12 Current liabilities

£'000s	H1 2021 Unaudited	FY 2020 Audited
Trade payables	555	858
Dividend payable	2,986	-
Other payables	8,925	7,262
Corporation tax	3,175	1,266
Contract liabilities - software implementation	5,539	1,947
Contract liabilities - deferred maintenance	9,324	5,047
Lease liabilities	16,750	17,491
Provisions for other liabilities	1,191	1,392
Total trade and other payables	48,445	35,263
Less: non-current portion	(16,171)	(17,182)
Total current liabilities	32,274	18,081

During the six months ended 30 June 2021, £3.5m licence fees (H1 2020: £3.8m) and £13.1m of annual maintenance fees were invoiced (H1 2020: £13.7m).  The annual maintenance invoicing during H1 2021 resulted in an increase of £4.3m of the deferred maintenance contracts liabilities compared to 31 December 2020.

13 Lease liability

The following table sets out the reconciliation of the lease liabilities from the 1 January 2020 to the amount disclosed at 30 June 2021:

£'000s						Total
Lease liabilities recognised at 1 January 2020						19,002
Additions						203
Disposals						(17)
Interest charge						787
Payments made on lease liabilities						(2,487)
Foreign exchange						3
At 31 December 2020						17,491
Additions						140
Interest charge						369
Payments made on lease liabilities						(1,250)
At 30 June 2021						16,750
£'000s			H1 2021 Unaudited			FY 2020 Audited
Non-current liability			14,980			15,790
Current liability			1,770			1,701
			16,750			17,491
Maturity analysis:				H1 2021 Unaudited		FY 2020 Audited
No later than 1 year				2,449		2,419
Between one year and 5 years				9,249		9,253
Later than 5 years				8,271		9,409
Total future lease payments				19,969		21,081
Total future interest payments				(3,219)		(3,590)
				16,750		17,491

14 Own shares

£'000s			Total
Own shares at 1 January 2020			-
At 31 December 2020			-
Own shares distributed			1,191
Own shares purchased			(2,641)
At 30 June 2021			(1,450)

Shares issued by the trust to employees are acquired on the market prior to issue.  Shares held by the trust and not yet issued to employees at the end of the reporting period are shown as Own shares in the financial statements. 

15 Financial and liquidity risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk and liquidity risk.  The Half Year Financial Statements do not include all financial risk management information and disclosures required in the Annual Financial Statements; they should be read in conjunction with the Annual Financial Statements.  The responsibility for risk management has remained with the Board and there has been no changes to risk management policies since year-end.

16 Controlling party and related party transactions

The immediate and ultimate parent undertaking is CHP Software and Consulting Limited, which is the parent undertaking of the smallest and largest group in relation to these Half Year consolidated financial statements.  The ultimate controlling party is Andrew Page.  There was no trading between the Group and the Parent.

In the six months ended 30 June 2021 the company entered into a rental agreement with CHP Software and Consulting Limited for rental of a meeting room on the 9^th Floor of Moor Place for £34,800 per annum (H1 2020: £nil) and at 30 June 2021 there was £nil balances outstanding from, or to, the parent (30 June 2020: nil).

17 Subsequent events

In the period since 30 June 2021 there have been no material subsequent events.

18 Dividends

The Board have declared a 10 pence per share Special dividend, amounting to £30m, payable on 5 November 2021 with a record date of 8 October 2021 and an ex-dividend date of 7 October 2021.  A special dividend of 15 pence per share was paid on 6 November 2020 equating to a total cash payment of £44.2m.  An ordinary dividend of 1 pence per share for the year ended 31 December 2020 equating to £3m was paid on 2 July 2021.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors confirm that these condensed consolidated Half Year financial statements (the 'Half Year Financial Statements') have been prepared in accordance with International Accounting Standard 34, 'Half Year Financial Reporting', as contained in UK-adopted international accounting standards and that the Half Year management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

• an indication of important events that have occurred during the first six months and their impact on the condensed Half Year Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

• material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The current directors are listed below all of whom were directors during the whole of the period:

Andrew Page

Andrew Denton

Duncan Magrath

Matthew White

Steve Breach

Adrian Chamberlain

Charlotte de Metz

Chris Sullivan

By order of the Board

Duncan Magrath  

Chief Financial Officer   

21 September 2021 

 

INDEPENDENT REVIEW REPORT TO ALFA FINANCIAL SOFTWARE HOLDINGS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the consolidated statement of profit or loss and comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and related notes 1 to 18.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing and presenting the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group will be prepared in accordance with UK-adopted International Accounting Standards.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Use of our report

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board and for the purpose of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.  Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

RSM UK Audit LLP

Chartered Accountants

25 Farringdon Street

London

EC4A 4AB

21 September 2021

 

DEFINITIONS

Constant currency

When the Company believes it would be helpful for understanding trends in its business, the Company provides percentage increases or decreases in its revenues or operating profit to eliminate the effect of changes in currency values.  When trend information is expressed herein "in constant currencies", the comparative results are derived by re-calculating comparative non-GBP denominated revenues and/or expenses using the average exchange rates of the comparable months in the current reporting period.

Operating free cash flow (FCF) conversion

Operating FCF conversion is calculated as cash from operations, less capital expenditures and the principal element of lease payments, as a percentage of operating profit.  Operating FCF is calculated as follows:

	H1 2021	H1 2020
Unaudited	£'000s	£'000s
Cash generated from operations	17,169	12,672
Capital expenditure	(563)	(601)
Principal element of lease payments	(881)	(846)
Operating FCF generated	15,725	11,225
Operating FCF Conversion	138%	108%

Total contracted value (TCV)

Total contracted value ("TCV") - TCV is calculated by analysing future contracted revenue based on the following components:

(i) an assumption of three years of Subscription payments (including maintenance, Cloud Hosting and subscription licence) assuming these services continued as planned (actual contract length varies by customer); 

(ii) the estimated remaining time to complete Services and Software deliverables within contracted software implementations, and recognise deferred licence amounts (which may not all be under a signed statement of work).

(iii) Pre-implementation and ongoing Services and Software work which is contracted under a statement of work.  As TCV is a reflection of future revenues, forward looking exchange rates are used for the conversion into GBP.  The exchange rates used for the TCV calculation are as follows:

Exchange rates used for TCV	H1 2021	H2 2020
USD	1.38	1.29
Euro	1.17	1.11

 

END

 

 

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