Alfa crashes on reduced guidance

In an update released 10 days before its half-year results, the provider of software to the asset finance industry blamed delays in the implementation of certain projects, and lower customer spending on optional upgrades and non-critical work. It said that this slowdown stemmed from wider macro uncertainty. Moreover, amid tough hiring competition, the group has been forced to increase salaries for its delivery teams above inflation and anticipates one-off legal costs in the second half.

For the six months to June, Alfa is guiding towards revenues of around £31m, down from £32.9m in the prior year, and operating profits of approximately £5m, down from £8.6m. It expects sales for the 12 months to December to sit somewhere between £63m and £65m, based on current customer agreements and the assumption that the difficult market backdrop persists. Last year, revenues landed at £71m.

Project delays are not a new issue for Alfa. In June 2018, the group’s market value nosedived after it said that a big customer had postponed its implementation programme. A potential new customer had also extended the scope of its project, and another existing customer looked likely to push out a decision around the expansion of a separate major contract.

Still, despite palpable challenges, the group’s latest preliminary numbers did offer some encouraging food for thought – prompting a rally in the shares. We learnt at the time that progress had been made on new sales opportunities, and that the group was striving to accelerate the speed of sales conversion.

And the most recent announcement was not all bad. Alfa has launched a project for a global original equipment manufacturer (OEM) in Europe, and has worked with two new customers in the Europe, the Middle East and Africa region, with a view to finalising licensing deals. Such deals could add a potential £4m to full-year revenues. Net cash at the period end also came in at £53.3m, up from £44.9m.