Alfa Financial keeps full year forecast but warns of lower software revenue

Asset finance software company Alfa Financial Software has maintained its full year revenue forecast in a preliminary trading update for the first half of the year.

The FTSE 250 firm said it continues to expect mid to high single digit revenue growth for the full year. Its total contract value (TCV) in the second quarter of 2024 was in line with the strong growth it saw in the first quarter.

“This is significantly above year end and up more than 35 per cent compared with this time last year,” Alfa Financial said on Wednesday. Last year, it posted a record TCV of £165.3m and its subscription TCV grew 28 per cent.

The company’s software platform helps businesses manage retail and corporate operations, including contract management.

Subscription revenues grew “strongly” in the first half, with high teens growth compared to the same period last year.

But, as expected, software revenues were significantly down on 2023 due to investment in its Alfa Systems 6 product and as it shifts to a cloud-hosted model.

Alfa added that services revenue was also lower than last year but it expects this to improve in the second half as new projects increase their budgets.

Peel Hunt analysts rated the company an ‘add’, saying: “In our view, Alfa’s strong deal pipeline, improving quality of earnings with the move to cloud subscriptions, and ongoing investments in its platform continue to enhance the value proposition.”

Shares rose 2.7 per cent on Wednesday morning and the stock has climbed over 30 per cent year to date.

Andrew Denton, chief executive officer of Alfa, said: “We are pleased with our performance in the first half of the year and are looking forward to an exciting second half of the year with several significant projects ramping up and the release of the final two pillars of Alfa Systems 6.

“This combined with strong sequential growth in Subscription revenues and an encouraging late-stage pipeline means we are well placed to achieve our expectations for the year and remain confident in the longer-term outlook for the business,” he added.

In March, the firm reported a pretax profit of £29.6m in 2023, up slightly from £28.9m in 2022. It reported net cash of £21.8m and no bank debt.