Alfa Financial Software Holdings PLC · LSE:ALFA
Alfa Financial Software — H1 2021 Earnings Presentation
38 slides from Alfa Financial Software's earnings presentation, Sep 22, 2021
Slide 1: 2021 Half Year Results
2021 Half Year Results Stepping into our opportunity 22 September 2021 1
Slide 2: Disclaimer
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the fo
Slide 3: Agenda
Agenda • Introduction and Key Highlights Andrew Denton, CEO • Financial Review Duncan Magrath, CFO • Operational Delivery Matthew White, COO • Business and Sales Update Andrew Denton, CEO • Summary Andrew Denton, CEO • Q&A 3
Slide 4: Introduction and Key Highlights
Introduction and Key Highlights Andrew Denton, CEO 4
Slide 5: Overview
Overview Review of H1 2021 Looking forward • Increased revenue, profits and TCV despite currency • Market conditions favourable headwinds • Continuing to recruit, innovate and invest in our • Continued successful delivery, incl. v4 to v5 upgrades product • High employee engagement • Strong conversio
Slide 6: Key Highlights
Key Highlights £41.1m +12% £11.4m 28% Revenue Revenue Operating profit Operating profit movement1 margin H1 2020: £38.2m At constant currency H1 2020: £10.4m H1 2020: 27% £125m 31 +14% 94% Subscription Staff retention Total Contract Value2 Headcount customers3 rate4 30 June 2020: £96m Growth since 3
Slide 7: Strategic Priorities
Strategic Priorities ● Maintain our differentiation of market leading People, Product and Delivery. ● Focus on cloud-hosted, subscription sales to our target markets. ● Enable more concurrent Alfa implementations, more efficiently, with a higher margin. ● Develop our partner network, to improve our
Slide 8: Financial Review
Financial Review Duncan Magrath, CFO 8
Slide 9: H1 Income Statement
H1 Income Statement Strong increase in constant currency revenue and profits 2020 H1 2021 H1 Change Change Revenues up 8% or 12% Key Financial Metrics £m £m £m % at constant currency Revenue 38.2 41.1 2.9 +8% Expenses net of other op. income (27.8) (29.7) (1.9) +7% Operating Profit up 9% or 22% at c
Slide 10: Subscription revenues
Subscription revenues Strong growth in subscription revenues 12 11.4 Total Revenue £41.1m Subscription revenue up 46% 10 7.8 8 Cloud First approach to sales 28% 6 £m Hosting customers up from 10 at end of 2020 to 14 at 30 June 4 21 2 Ongoing maintenance Subscription Software Services contracts incre
Slide 11: Software revenues
Software revenues Reduced customised licence offset by increased development 9 7.9 8 Total Revenue £41.1m Further enhancements to 7 6.4 software, including supporting 6 wholesale customers 5 Licence revenues down this £m year due to work shifting from 4 new implementations into v4 3 16% to v5 upgrad
Slide 12: Services revenues
Services revenues Increased revenues with reduced customer concentration Increased diversification - Top 5 Services customers in H1 2021 accounted for 47% of revenues 25 23.3 (H1 2020: 59%) 22.5 Total Revenue £41.1m 20 Continued high levels of service and delivery, operating 100% remotely 15 £m 10 5
Slide 13: Expenses net of other operating income
Expenses net of other operating income Overall costs up 7%, slightly behind revenue Higher salary costs from headcount increases, but reduced T&E Higher salary costs from increased headcount – £m average FTE in period up 2020 H1 2021 H1 from 322 to 375 Salaries and on costs 17.4 19.8 Contractor cost
Slide 14: Cash flow
Cash flow Continued strong cashflow £m 2020 H1 2021 H1 Very strong cash flow in the Operating profit 10.4 11.4 period Depreciation and amortisation 1.5 1.5 Share based payments 0.5 0.7 Working capital inflow due to Movement in contract liabilities 3.5 2.5 annual maintenance billing and Net movement
Slide 15: Balance Sheet
Balance Sheet Robust balance sheet with £50m of cash Strong cashflow reflected in increase in cash from £37m to £50m in the period £m Dec 2020 June 2021 Total non-current assets 44.8 43.1 Seasonal increase in Current assets receivables due to higher Trade receivables 5.8 8.7 billings Prepayments, ac
Slide 16: TCV
TCV Continued strong growth in TCV Same methodology used as previously, using new revenue splits 140 £125m 120 £112m Total TCV up 11% in last 6 Next 12 months months, with Subscription TCV up 12% as customers 100 increased. Software up from £53m £56m £13m to £19m due to secured 60 80 development and
Slide 17: Capital Allocation and Dividends
Capital Allocation and Dividends • We are a strongly cash generative business with net cash of £50m at the half year • We announced the initiation of a regular dividend with our 2020 results • We will pay a regular annual dividend each year, which we will propose as a single annual payment declared
Slide 18: Modelling guidance
Modelling guidance • Effective tax rate of 18% for the full year • We will propose a dividend with the full year results, and this will be paid after approval at the AGM in 2022 • Capex is expected to remain relatively low in 2021 • Currency sensitivity • 1c movement in both USD/€ impacts revenue by
Slide 19: Operational Delivery
Operational Delivery Matthew White, COO 19
Slide 20: Strategic Priorities
Strategic Priorities ● Maintain our differentiation of market leading People, Product and Delivery. ● Focus on cloud-hosted, subscription sales to our target markets. ● Enable more concurrent Alfa implementations, more efficiently, with a higher margin, by: ○ Simplifying our product; ○ Simplifying o
Slide 21: Software and Technology
Software and Technology We remain the premier platform in a market with complex requirements ● Ongoing functional and technical product enhancement ○ European regulatory support ○ Credit decisioning ○ Collections ○ UI refresh ongoing ○ Wholesale ○ Increasing focus on functional improvements to serve
Slide 22: Cloud Hosting Service
Cloud Hosting Service A fast-growing new revenue stream; a compelling offering for customers • Strong take-up with new and existing customers • Provides agility and automation • Simplifies Alfa Systems delivery 22
Slide 23: People
People In a challenging recruitment market, we are attracting, developing and retaining the best talent in our industries • 14% headcount growth over the last 12 months • Sustained positive engagement >70% • Strong retention at 94% • “Alfa Smart Working” will commence in January 2022, subject to Cov
Slide 24: Delivery
Delivery Delivery track record is a key differentiator for new sales • Ongoing delivery at increasing pace • Alfa Start • Product for smaller asset finance providers • Expands our market • Gives us a platform for innovation • Simplification • Makes us more competitive • Increases margin • Increased
Slide 25: Delivery Progress – New Alfa v5 Implementations
Delivery Progress – New Alfa v5 Implementations Client descriptor Size Territory Partners Hosting Contracted Comment Auto Fin. A US N N Y Phase 2 ongoing. Equip. Fin. B EMEA N Y Y Successful go-live March 2021. Auto Fin. B US N N Y Preparing for go-live. Auto Fin. D US N Temp. Y Implemen
Slide 26: Delivery Progress - New Alfa v5 Implementations (Contd)
Delivery Progress - New Alfa v5 Implementations (Contd) Client descriptor Size Territory Partners Hosting Contracted Comment Retail Bank H EMEA Y Y N v5 upgrade project in implementation. Auto OEM D EMEA Y Temp. Y Project in implementation. Wholesale Fin A US N Y Y Implementation in progre
Slide 27: Business and Sales Update
Business and Sales Update Andrew Denton, CEO 27
Slide 28: ESG
ESG Continuing to create a positive impact • Culture • Communities • Health and wellbeing focus • Fundraising • Recruitment and retention • Volunteering • Innovation • Impact • Smart working • Environment • Inclusion, diversity and belonging • Greener business practices • Employee community groups •
Slide 29: Market Overview
Market Overview Asset finance market remains a great place to be Short term Medium to Long term • Markets favourable • Asset finance markets do well during downturns, • Demand for subscription with greater share of finance necessary for recovery • Penetration in wholesale market • Secular drivers fo
Slide 30: Late Stage Pipeline Update
Late Stage Pipeline Update Status Status Potential Client descriptor Size Partners Territory Comment Mar 21 Sept 21 Wholesale Fin. A N US Working Won Implementation underway Retail Bank F Y UK/US Talks Talks Letter of Engagement – v5 upgrade Retail Bank G N UK Talks Talks Shortlist of two Re
Slide 31: Growth Drivers and Investment Case
Growth Drivers and Investment Case • Base Case: • Accelerators: • Strongly positioned in a large resilient addressable • Subscription market with clear structural growth drivers • Alfa Start • Our differentiated business model is difficult to • Partnerships replicate • Technology • Constant innovati
Slide 32: Summary
Summary Andrew Denton, CEO 32
Slide 33: Summary and outlook
Summary and outlook ……..we are stepping into our opportunity • Pleased with 2021 H1 performance • c4% increase in our revenue expectation for 2021 which will be healthy growth • We have continued to: over 2020 underlying revenues • develop and deliver our software • retain and attract diverse smart
Slide 34: Q&A
Alfa’ Q&A
Slide 35: Appendices
Appendices 35
Slide 36: Definitions
Definitions Measures not specifically defined by IFRS Constant currency Total contracted value (TCV) When the Company believes it would be helpful for understanding trends in Total contracted value (“TCV”) - TCV is calculated by analysing future its business, the Company provides percentage increase
Slide 37: New revenue disclosures
New revenue disclosures Comparison of 2020 results on new and old basis 2020 Revenues as previously presented H1 H2 FY £k Software implementation 16,194 11,134 27,328 Maintenance 8,223 10,956 19,179 Ongoing Development Services 13,757 18,606 32,363 Total – originally presented 38,174 40,696 78,870 2
Slide 38: New revenue disclosure
New revenue disclosure Definitions • Software - Revenue from selling or developing software • Subscription – All revenue charged to clients on a for new or existing customers subscription basis Software revenue follows the Group’s customised licence revenue Subscription revenue is the Group’s recurr
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