TIDMALFA
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
GBPm, 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)%
H1 2021 Unaudited 31 Dec 2020 Movement
GBPm, unless otherwise stated Audited %
------------------------------- ------------------ ------------ ---------
Cash 50.0 37.0 35%
Key measures (1) H1 2021 H1 2020 Movement
GBPm, 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 GBP50m of cash and no debt
-- Special Dividend of 10 pence per share (GBP30m) declared
taking total dividends over 12 months to 26 pence and GBP77m
-- Encouraging progress in converting late stage pipeline with
TCV up by 30% since H1 2020 to GBP125m 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 +44 (0)20 7588 1800
Andrew Denton, Chief Executive
Officer
Duncan Magrath, Chief Financial
Officer
Andrew Page, Executive Chairman
Tulchan Communications LLP +44 (0)20 7353 4200
James Macey White
Matt Low
Barclays +44 (0)20 7623 2323
Robert Mayhew
Edward Hill
Investec +44 (0)20 7597 4000
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
alfa@tulchangroup.com . 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 GBP41.1m (2020 H1: GBP38.2m) 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 GBP1m 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
GBP2.9m was partially offset by increased costs of GBP1.9m
resulting in Operating Profit up GBP1.0m to GBP11.4m (2020 H1:
GBP10.4m). Cash conversion was strong at 138% and we finished the
period with net cash of GBP50.0m (31 Dec 2020: GBP37.0m).
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
GBP30m. 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 GBP77m.
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 GBP78.9m, with underlying revenues
of GBP73.3m once GBP5.6m 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
GBP'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 GBP2.9m to GBP41.1m in the six
months ended 30 June 2021 (H1 2020: GBP38.2m). Growth at constant
currency was 12%.
Operating profit increased by GBP1.0m to GBP11.4m (H1 2020:
GBP10.4m), due to the GBP2.9m increase in revenues, partially
offset by GBP1.9m increase in expenses, principally due to a
GBP2.2m increase in salary costs from pay rises and increased
headcount.
Net finance costs which relate to leases expense of GBP0.3m (H1
2020: GBP0.3m) resulted in profit before tax of GBP11.0m (H1 2020:
GBP10.1m). 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
GBP8.8m (H1 2020: GBP7.8m).
Revenue
Revenue - by type H1 2021 H1 2020 Movement
GBP'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 GBP11.4m (2020
H1: GBP7.8m). The increase was driven by a 14% increase in
maintenance revenues up from GBP7.0m to GBP8.0m, 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 GBP6.4m were down GBP1.5m or 19% on last
year (H1 2020: GBP7.9m). 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 GBP23.3m (H1 2020:
GBP22.5m) 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
GBP'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 GBP125.2m as at 30 June 2021 (31 December
2020: GBP112.9m, 30 June 2020: GBP96.4m). 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, GBP55.7m (H2 2020:
GBP52.3m) is anticipated to convert into revenue within the next 12
months, assuming contracts continue as expected and are not
cancelled or delayed. This includes GBP10.2m (H2 2020: GBP6.1m) of
Software revenues, GBP24.0m (H2 2020: GBP22.4m) of Subscription
revenues and GBP21.5m (H2 2020: GBP23.8m) of Services revenues.
Operating profit
The Group's operating profit increased by GBP1.0m, or 9%, to
GBP11.4m in H1 2021 (H1 2020: GBP10.4m) primarily reflecting the
GBP2.9m 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
GBP'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 GBP0.9m to GBP15.0m (2020: GBP14.1m)
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 GBP1.1m to GBP15.0m in the six month period to 30 June 2021 (H1
2020: GBP13.9m). 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
GBP1.3m (2020 H1: GBP0.9m) along with increases in the share-based
payment charges in H1 2021 to GBP0.7m (H1 2020: GBP0.5m), there has
also been an increase in foreign currency differences of GBP0.7m,
which moved from a gain of GBP0.4m in H1 2020 to a loss of GBP0.3m
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 GBP0.3m (H1 2020:
GBP0.3m) 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 GBP1.0m, or 12%, to GBP8.8m
in H1 2021 (H1 2020: GBP7.8m). 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 GBP13.0m to GBP50.0m at 30 June 2021, from GBP37.0m 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
GBP17.2m, the Group incurred GBP0.6m on capital expenditure (H1
2020: GBP0.6m) and received net tax repayments of GBP0.3m (H1 2020:
paid GBP1.4m) 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
GBP3.5m (H1 2020: GBP0.8m) 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 GBP3.0m 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 GBP30m, 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 GBP5.3m to
GBP19.0m at 30 June 2021 (31 December 2020: GBP13.7m) 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 GBP4.4m to
GBP12.5m at 30 June 2021 (31 December 2020: GBP8.1m) principally
due to the dividend payable of GBP3.0m on 2 July 2021 and an
increase in the holiday pay accrual of GBP0.7m reflecting the
seasonality of fewer holidays being taken in the first half of the
year.
Contract liabilities increased by GBP7.9m to GBP14.9m at 30 June
2021 (31 December 2020: GBP7.0m) 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 MONTHSED 30 JUNE 2021
H1 2021 H1 2020
Unaudited Unaudited
GBP'000s Note (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
30 June 31 Dec
2021 2020
GBP'000s Note Unaudited 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 MONTHSED 30 JUNE 2021
Equity
attributable
Share Own shares Translation Retained to owners
GBP'000s Notes capital reserve earnings 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
MONTHSED 30 JUNE 2021
H1 2021 H1 2020
GBP'000s Note Unaudited 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:
H1 2020
H1 2021 Unaudited
GBP'000s 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:
H1 2021 H1 2020
GBP'000s Unaudited 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:
GBP'000s H1 2021 H1 2020
Unaudited 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
GBP'000s H1 2021 H1 2020
Unaudited 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 - GBP'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 - GBP'000s Subscription Software Services Total revenue
(restated)
----------------------------------------- ------------- --------- --------- --------------
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:
H1 2020
GBP'000s H1 2021 Unaudited
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
H1 2021 H1 2020
GBP'000s Unaudited 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 H1 2021 H1 2020
(including Directors) Unaudited 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
GBP2.2m (H1 2020: GBP2.2m). 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
Computer software Internally generated
GBP'000s 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
Fixtures and
GBP'000s 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
GBP'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:
GBP'000s H1 2021 FY 2020
Unaudited 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 GBPnil (H1 2020: GBPnil).
11 (a) Trade receivables ageing
H1 2021 FY 2020
Ageing of net trade receivables GBP'000s Unaudited 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
GBP0.3m trade receivables past due 91+days at 30 June 2021, the
total related to a single invoice that remains outstanding.
11 (b) Other receivables
GBP'000s H1 2021 FY 2020
Unaudited 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
GBP3.3m since last year-end due to higher accrued income on
Subscription revenue of GBP1.3m and Services revenue of
GBP1.5m.
12 Current liabilities
H1 2021 FY 2020
GBP'000s Unaudited 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, GBP3.5m licence fees
(H1 2020: GBP3.8m) and GBP13.1m of annual maintenance fees were
invoiced (H1 2020: GBP13.7m). The annual maintenance invoicing
during H1 2021 resulted in an increase of GBP4.3m 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:
GBP'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
------------------------------------- ----------- ----------- -------------------
GBP'000s H1 2021 FY 2020
Unaudited Audited
------------------------------------ ---- ------------------- -------------------
Non-current liability 14,980 15,790
Current liability 1,770 1,701
------------------------------------------ ------------------- -------------------
16,750 17,491
---- ------------------- -------------------
Maturity analysis: H1 2021 FY 2020
Unaudited 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
GBP'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
GBP34,800 per annum (H1 2020: GBPnil) and at 30 June 2021 there was
GBPnil 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 GBP30m, 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 GBP44.2m. An ordinary dividend
of 1 pence per share for the year ended 31 December 2020 equating
to GBP3m 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
INDEPENT 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 GBP'000s GBP'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
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END
IR LBMRTMTMTBAB
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September 22, 2021 01:59 ET (05:59 GMT)
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