Alfa Financial Software’s FY 2025: double‑digit growth, fatter profits and a bigger dividend
Alfa Financial Software has posted an impressive set of full year numbers for 2025. Revenue rose 15% to £126.7m, operating profit climbed 17% to £40.1m, and cash generation remained excellent. The company is leaning hard into SaaS subscriptions, growing this stream 16%, while still executing crisply on project delivery.
Management’s confidence shows in the cash returns. A 3.1p special dividend has been declared and a 1.5p ordinary dividend is proposed. With £26.4m of cash and no bank debt, Alfa has room to keep investing as well as reward shareholders.
Headline numbers investors should know
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Revenue | £126.7m | £109.9m | +15% |
| Operating profit | £40.1m | £34.3m | +17% |
| Operating margin | 31.6% | 31.2% | +0.4pp |
| Profit before tax | £40.1m | £34.1m | +18% |
| Basic EPS | 10.19p | 8.68p | +17% |
| Subscription revenue | £43.6m | £37.5m | +16% |
| Delivery revenue | £63.5m | £55.0m | +15% |
| Software Engineering revenue | £19.6m | £17.4m | +13% |
| ARR | £43.9m | n/a | – |
| NRR | 109% | 103% | +6pp |
| Total Contract Value (TCV) | £227.5m | £221.3m | +3% |
| Cash | £26.4m | £20.5m | +29% |
| Operating free cash flow conversion | 97% | 89% | +8pp |
| Dividends | Special 3.1p declared; Ordinary 1.5p proposed | Special 2.4p; Ordinary 1.4p | Up |
Jargon buster for context: ARR is annual recurring revenue. NRR is net revenue retention – a measure of how much recurring revenue grows or shrinks within the existing customer base after churn and upsell. TCV is the total value expected from contracted work, a forward indicator of future revenue.
What powered the year: subscriptions up, delivery humming
Subscriptions remain the fastest growing piece of the pie, up 16% to £43.6m. ARR sits at £43.9m, up 15%, and NRR ticked up to a healthy 109% as customers expanded usage during implementations. Alfa now counts 42 subscription customers, with 22 on Alfa Cloud and six of those still in implementation – a pipeline for future recurring revenue.
Delivery revenue rose 15% to £63.5m, helped by projects won in late 2024 ramping through 2025. That momentum showed up operationally too: 35 go lives in the year and 20 customers now on Alfa Systems 6, underlining the company’s ability to execute complex change for large finance providers.
Software Engineering revenue increased 13% to £19.6m, with strong H1 skew from customer-led development. Management flags that as implementations shift to simpler, accelerator-led deployments, chargeable development may ease – but time to full subscription run rate should improve. That is a trade-off most SaaS investors like.
Cash machine with growing shareholder returns
Cash generation was again a highlight. Operating free cash flow conversion was 97%, at the top end of Alfa’s 90% – 100% guide. Year end cash was £26.4m with no borrowings. Despite paying £26.0m of dividends during 2025, cash still increased by £5.9m.
For the new year, the Board has declared a 3.1p special dividend (payment date 29 May 2026) and proposed a 1.5p ordinary dividend (payment date 26 June 2026, subject to AGM approval). That signals confidence without starving product investment.
Pipeline and TCV: subscriptions up, bespoke work easing
Total Contract Value edged up 3% to £227.5m. Under the bonnet, Subscription TCV jumped 18% to £161.5m, while Software Engineering and Delivery TCV decreased as backlogs were worked down. For the next 12 months, anticipated TCV conversion is £98.2m, up 3%, with the Subscription slice also up 18% to £49.5m.
Two takeaways. First, this mix shift is consistent with Alfa’s strategy of standardising implementations and growing recurring software revenues. Second, short term Delivery and Engineering visibility is flatter – SE TCV for the next 12 months is down 35% – so near term growth will lean more on subscriptions and ongoing delivery execution.
The late-stage pipeline looks solid with 10 prospects at year end, eight where Alfa is preferred and five already working under letters of engagement. Conversion of those into signed contracts will be a key watch-out.
Strategy in action: cloud-native platform, targeted product spend
Alfa invested £37.7m into product development in 2025, focusing on US Auto Originations, Fleet and Commercial Finance. The aim is clear – expand the serviceable and total addressable markets and deepen the competitive moat. Notably, Alfa highlights its single-tenant, cloud-native architecture and certifications (ISO 27001, ISO 27018, SOC1 and SOC2) as differentiators for mission-critical, regulated workloads.
The company also continues to simplify and scale delivery. The Alfa Start accelerators, Central Delivery Teams, and the new smart hub in Poland are all designed to lift throughput and shorten time to value. Staff retention is strikingly high at 97%, with average headcount up 6% to 516 – a cultural strength that shows up in delivery metrics.
Margins, FX and the “Rule of 40”
Gross margin dipped modestly to 63.7% from 64.5%, reflecting scale in hosting and people costs, while operating margin improved to 31.6%. On the company’s constant currency view, revenue grew 17% and the CEO notes an operating margin of 32% – adding up to beat the popular “Rule of 40” benchmark, where growth plus margin exceeds 40%.
One caveat for 2026 is currency. The Americas now represent 45% of revenue, which the company says creates a headwind at current exchange rates. Alfa does use forward contracts and benefited from £1.5m of gains in 2025, but FX remains a moving part for reported growth.
Outlook 2026: what I’ll be watching
Guidance is for strong Subscription revenue growth and good Delivery growth, set against currency and macro uncertainty. The market backdrop in asset finance remains robust, and Alfa’s diversification across regions, asset classes and customer types helps.
- Late-stage pipeline conversion – 10 prospects, five already under letters of engagement. Signed contract packs are the trigger for TCV uplift.
- ARR and NRR trajectory – ARR at £43.9m and NRR at 109% are strong. Sustaining double-digit ARR growth will be key for the premium SaaS narrative.
- Mix shift effects – simpler deployments could trim near-term Software Engineering revenue but accelerate subscription run rate. Watch Delivery gross margins and hosting costs.
- AS6 adoption – 20 customers live today. More upgrades should support upsell and stickiness.
- FX translation – with 45% of revenues in the Americas, reported growth will be sensitive to GBP strength.
My take: quality compounding with a sensible capital return
This is a strong print. Double-digit top line growth, rising margins, 97% cash conversion, and a bigger dividend tell a consistent story. Subscription momentum, 35 go lives and 20 customers on AS6 all reinforce Alfa’s execution credentials in a regulated, mission-critical niche.
The softer near-term Engineering TCV and currency headwinds are the main negatives, but they look like by-products of a deliberate shift to standardised SaaS and a stronger US footprint. If the late-stage pipeline converts and ARR keeps stepping up, the model should continue to compound.
For those who want to dig deeper, an archived webcast is available on the company’s Investors page: alfasystems.com/en-eu/investors.
