Alfa Financial Software Holdings PLC · LSE:ALFA
Alfa Financial Software — FY2020 Earnings Presentation
36 slides from Alfa Financial Software's earnings presentation, Mar 23, 2021
Slide 1: 2020 FY Results Presentation
2020 FY Results Presentation Developing Momentum 23 March 2021
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
Slide 4: Introduction and Key Highlights
Introduction and Key Highlights Andrew Denton, CEO
Slide 5: Overview
Overview Review of 2020 Looking forward • Revenue and profit significantly ahead of original • Continuing to recruit more people and innovate expectations and last year, and slightly ahead of and invest in our product most recent update • Underlying markets have remained resilient but • Covid-19 dis
Slide 6: 2020 – at a glance
2020 – at a glance Financial and operational highlights £78.9m +22% £23.9m 30% Revenue Revenue movement (1) Operating profit Operating profit margin 2019: £64.5m At constant currency 2019: £13.7m 2019: 21% 7 18 360 93% Ongoing Imp. projects (2) ODS customers during yr (3) Headcount Staff retention r
Slide 7: Financial Review
Financial Review Duncan Magrath, CFO
Slide 8: Income Statement analysis
Income Statement analysis Strong increase in revenue and profits 2019 2020 Change Change Key Financial Metrics £m £m £m % • Revenue, excluding one-off licence Underlying revenue 59.0 73.3 14.3 +24% revenues, increase 24%, with strong growth in ODS and maintenance One-off licence revenue 5.5 5.6 0.1
Slide 9: Software implementation revenues
Software implementation revenues Steady performance from ongoing implementations No. of active implementation customers at end of period > £200k 4 6 7 • New implementation is an Alfa Total Revenue £78.9m Start project, to be completed in 31 30.4 2021 30 • Large majority of the 29 19.2 implementation
Slide 10: Ongoing Development Services Revenues
Ongoing Development Services Revenues Strong growth in underlying revenues, overall revenue boosted by one-off licence income No. of customers during the period > £200k 14 13 18 • Five pre-implementation Total Revenue £78.9m customers in the year, one not 35 continuing, one has moved into 30 5.6 imp
Slide 11: Maintenance revenues
Maintenance revenues Growth in maintenance revenues with widening customer base and fast growing cloud hosting revenues No. of customers during the period 26 26 30 • 29% growth in maintenance Total Revenue £78.9m revenues to £19.2m 25.0 • Maintenance revenues increased 19.2 due to three customers go
Slide 12: Expenses net of other operating income
Expenses net of other operating income Continued investment in people but reduction in costs due to Covid-19, some will reverse in 2021 59 57 • Continuing to invest in people, with average headcount up 54.9 to 341 (2019: 313), with higher retention rates 93% (2019: 55 83%). Continuing to recruit in
Slide 13: Cash flow
Cash flow Cash conversion remains above 100% £m 2019 2020 Operating profit 13.7 23.9 Depreciation and amortisation 2.8 3.1 • 2020 Free Cash Flow Conversion of 114% Share based payments 0.7 1.5 • Decrease in contract liabilities of £1.9m, due to work Loss on disposal of assets - 0.1 progressing on cu
Slide 14: Balance Sheet
Balance Sheet Robust balance sheet with net cash of £37m £m Dec 2019 Dec 2020 Total non-current assets 45.2 44.8 • Small decrease in trade and other receivables Current assets despite increased revenue at end of year Trade receivables and accrued income 11.3 10.8 • Remains a clean ledger - at 31 Dec
Slide 15: Total Contract Value (“TCV”)
Total Contract Value (“TCV”*) Strong growth in TCV largely due to growing subscription revenues, along with some v5 upgrades 112.9 120 • Implementation TCV has been maintained, strong 96.4 100 performance in H2 has been replenished with new work 80.5 • ODS TCV up versus H1, some of which is seasonal
Slide 16: Capital Allocation and Dividends
Capital Allocation and Dividends Special dividend in 2020, regular dividends initiated • Business continues to be cash generative • We can grow the business naturally, with no need for significant M&A • We have looked at a range of downsides, and even in severe downside scenarios we hold significant
Slide 17: Modelling guidance
Modelling guidance • Effective Tax rate will increase from 12.4% to c18%, assuming continuing benefit of higher R&D tax credits • Proposed dividend of 1.0p for Full Year 2020, equates to final dividend of 0.67p for 2020 • Capex will revert back to 2019 levels of £2m with increased capitalization of
Slide 18: Operational Review
Operational Review Matthew White, COO
Slide 19: Product
Product We are increasing our technology advantage • Our market has complex requirements, and the complexity is increasing • Alfa Systems remains ahead of the market • Release of Alfa Systems version 5.6 • Risk-free rates • Redesigned UI/UX • Usage-based billing • Cash accounts • Continuing investme
Slide 20: Alfa Hosting
Alfa Hosting A transformational year for our hosting product • 4 customers at 1 Jan 2020 • 10 customers at 31 Dec 2020 • Jan 2020 billing - £107k • Dec 2020 billing - £377k • Moved to BAU operation • Successful high-volume go-live in November 2020 • “Cloud Hosting First” sales model 20
Slide 21: People
People An outstanding team rising to challenges (and growing) • COVID response • Early and seamless move to remote working • Supporting each other, and learning from the experience • Improved engagement • Increased retention – up to 93% • Ongoing recruitment • 14% headcount growth • Salary pressure
Slide 22: Delivery
Delivery Accelerating delivery pace • 5 go-lives in year • Increased use of partners • Half of South Africa bank implementation team provided by partners 22
Slide 23: Pre-Implementation
Pre-Implementation Increasing work in pre-implementation before signing licence agreements Client descriptor Size Partners Territory Comment Retail Bank B Did not progress to implementation Auto Fin. D Moved to implementation from 1 Jan 2021 Auto OEM C ROW Contracts in negotiation C
Slide 24: Implementation update
Implementation update Accelerating progress with implementation projects Client descriptor Size Partners Territory Comment Equip Fin B Preparing for go-live. Auto Fin. A Ongoing Implementation Phase 1 successful go-live, Phase 2 ongoing Auto Fin. B Development largely complete, impleme
Slide 25: Business and Sales Update
Business and Sales Update Andrew Denton, CEO
Slide 26: Creating a positive impact
Creating a positive impact Commitment strengthened through 2020 • Culture • Health and wellbeing focus • Recruitment and retention • Innovation • Inclusion, diversity and belonging • Employee community groups • Communities • Fundraising • Volunteering • Impact • Environment • Greener business practi
Slide 27: Market overview
Market overview Short term weakness but with some recovery in H2 20. Medium term resilience and opportunities Short-term Medium to Long term • Asset finance market more resilient in US, weaker • Asset finance markets do well during downturns, in UK /Europe with greater share of finance • Recovery in
Slide 28: Late stage pipeline – update from H1 results
Late stage pipeline – update from H1 results Four contracts signed, one migration completed Potential Client descriptor Size Partners Territory Comment Auto Fin. D Contracts signed – in implementation in 2021 Auto Fin. F Cloud Hosting contract signed and gone live Retail Bank E Contr
Slide 29: Late stage pipeline – update from H1 results
Late stage pipeline – update from H1 results Ten contracts still in negotiation – none lost Potential Client descriptor Size Partners Territory Status Comment Wholesale Fin. A Working Preferred supplier, Retail Bank F Letter of Engagement – v5 upgrade Retail Bank G Shortlist of two Ret
Slide 30: Technology Leadership
Technology Leadership Alfa iQ: The intelligence platform for asset finance • Alfa iQ is a joint venture between Alfa and Blaise Thomson’s Bitfount to leverage artificial intelligence and machine learning in asset and auto finance • Combines Bitfount’s AI knowledge and Alfa’s asset finance expertise
Slide 31: Growth drivers and Investment Case
Growth drivers and Investment Case • Strongly positioned in a large resilient addressable market with clear structural growth drivers • Our differentiated business model is difficult to replicate • Constant innovation delivers leading-edge technology embedding strong long-term customer relationships
Slide 32: Summary
Alfa: Summary Andrew Denton, CEO
Slide 33: Summary and outlook
Summary and outlook • Pleased with 2020 performance • We have coped well with the challenges we have faced – due to great people and technology • We have continued: • to win new work and develop late stage pipeline • to successfully deliver projects • to be a technology leader • We expect 2021 reven
Slide 34: Q&A
Alfa. Q&A
Slide 35: Customer Overview – at 31 Dec 2020
Customer Overview – at 31 Dec 2020 Growth in ODS customers, underpinned by Maintenance and increasingly Cloud Hosting Service Customer number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Pre-implementation 4 Implementation 7 Completed Imp. - moved to ODS 1 O
Slide 36: Definitions
Definitions Measures not specifically defined by IFRS Total Contract Value Operating free cash flow conversion • TCV is calculated by analysing future contracted revenue based on the following components: • Operating free cash flow conversion is calculated as cash from operations, less capital expen
Alfa Financial Software Holdings — FY2020 Earnings Presentation on 6ix