Alfa Financial Software (ALFA) posted a year-on-year revenue decline, with operating profits down by more than a third due to delays in implementation of projects and reduced discretionary spend by customers. The decline in turnover, combined with an increase in the group's cost base, saw the operating profit margin decrease by 11 per cent. Management said that it anticipates further "short-term pressure" on margins due to the uncertain trading environment caused by coronavirus.
The company, which provides software to the asset finance industry, credited its weak performance in 2019 to reduced capital expenditure by its customers during a difficult macroeconomic and political backdrop. This led to a reduction in customer spending on optional upgrades and non-critical work, as well as slower-than-anticipated implementations of projects. Its business in the US, which accounts for over two-fifths of total sales, saw revenue slide by 15 per cent to £28.1m, on top of a £7.3m fall in implementation revenue from existing clients.
Although Alfa said that it had seen an "encouraging start to the year", it has received requests from customers to reschedule work and has lost a contract with a US auto company that it had won post year-end. Its early-stage pipeline has been affected by the market-wide uncertainty – although the company said that it is maintaining engagement for "later-stage opportunities".
Broker Numis forecasts pre-tax profits of £1.9m and EPS of 0.5p in 2020, rising to £5.2m and 1.4p in 2021.
| ALFA FINANCIAL SOFTWARE (ALFA) | ||||
| ORD PRICE: | 78p | MARKET VALUE: | £234m | |
| TOUCH: | 78-81p | 12-MONTH HIGH: | 152p | LOW: 52p |
| DIVIDEND YIELD: | na | PE RATIO: | 22 | |
| NET ASSET VALUE: | 27p* | NET CASH: | £39.8m** | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 54.0 | 22.9 | na | nil |
| 2016 | 73.3 | 17.2 | 2.8 | nil |
| 2017 | 87.8 | 33.9 | 9.1 | nil |
| 2018 | 71.0 | 22.5 | 6.3 | nil |
| 2019 | 64.5 | 13.0 | 3.5 | nil |
| % change | -9 | -42 | -44 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £27m, or 9p a share **Netted against lease liabilities of £19m | ||||
