Alfa Financial Software’s (ALFA) revenues topped analysts’ expectations in its maiden results since listing on the main market in June this year. Sales were partly buoyed by currency movements: the US accounts for 45 per cent of Alfa’s turnover. But, at constant currencies, the top line still rose by 29 per cent. The company, which specialises in software for the asset finance industry, also saw adjusted earnings before interest and taxation of £21.4m; up 77 per cent against the first half of 2016. The market reacted positively, sending its shares up 5 per cent on results day.
When it went public, Alfa marked the biggest UK technology IPO since 2015. The offer price implied a market capitalisation of approximately £975m, but the shares leaped on their debut. Today, the company’s market capitalisation is £1.37bn. Its main product is Alfa Systems, a software platform that provides pricing, contract and customer management and other services to asset finance providers. It is billed as a “highly scalable and flexible” product that allows clients to adapt to a changing regulatory environment.
Flotation had always been management's goal, bosses told the IC. In the IPO prospectus, reasons for listing included raising the group’s profile, potential benefits in “recruiting, retaining and incentivising key management and employees” and giving the selling shareholder a return on its investment: that was CHP Software & Consulting Ltd, controlled by executive chairman Andrew Page.
Alfa secured two clients in the first half, against a target of two or three in the full year, taking the total to 31. One is a global equipment manufacturer and finance group, which will see the Europe-wide implementation of Alfa Systems, and the other is a US auto finance provider. Management notes there is a strong customer pipeline in place.
The company’s net cash position fell to £20.5m from £36.0m a year earlier, driven by pre-IPO dividend payments of £33.7m (net of loan repayments), and non-recurring IPO costs of £3m. On the prospect of future dividend payments, management explained that Alfa is cash generative, but wants “optionality”. Bosses said bolt-on acquisitions are a possibility, if they can be shown to enhance Alfa's technology or to grow its headcount, which hit 300 by the period-end.
Analysts at Numis forecast pre-tax profits of £41.3m and EPS of 10.6p for FY2017, up from £33.4m and 8.6p in 2016.
| ALFA FINANCIAL SOFTWARE (ALFA) | ||||
| ORD PRICE: | 458p | MARKET VALUE: | £1.37bn | |
| TOUCH: | 457-458p | 12-MONTH HIGH: | 494p | LOW: 395p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 12.8p* | NET CASH: | £20.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016** | 28.7 | 12.2 | 2.61 | nil |
| 2017** | 45.1 | 14.0 | 3.58 | nil |
| % change | +57 | +15 | +37 | nil |
| Ex-div: | na | |||
| Payment: | na | |||
*Includes intangible assets of £24.7m, or 8.2p a share **Alfa joined the main market in June 2017. Excludes pre-IPO dividends | ||||
