Alfa Financial Software H1 2025 results – strong growth, fatter margins and another special dividend
Alfa Financial Software has delivered a punchy first half. Revenue rose 20% to £62.5m, operating profit jumped 33% to £21.6m and the operating margin widened to 35% as Software Engineering work surged. Annual Recurring Revenue (ARR) climbed 16% to £41.6m and Net Revenue Retention (NRR) hit 112%, showing customers are sticking around and spending more.
The balance sheet remains clean with £23.9m of cash and no bank debt. On the back of strong cash generation, the Board has declared a special dividend of 5.0 pence per share, about £14.8m, payable on 7 November 2025.
Key numbers at a glance
| Metric | H1 2025 | H1 2024 | Change |
|---|---|---|---|
| Revenue | £62.5m | £52.3m | +20% (+22% cc) |
| Operating profit | £21.6m | £16.2m | +33% |
| Operating margin | 35% | 31% | +4pp |
| Profit before tax | £21.5m | £16.1m | +34% |
| Basic EPS | 5.38p | 4.05p | +33% |
| ARR | £41.6m | £35.8m | +16% |
| NRR | 112% | 106% | +6pp |
| Total Contract Value (TCV) | £211m | £193m | +9% |
| Next 12 months TCV | £90m | £72m | +25% |
| Cash | £23.9m | £20.5m (Dec-24) | +17% |
| Special dividend | 5.0p | 4.2p | +19% |
Revenue growth and margin quality
Top line grew 22% at constant currency to £62.5m, with the Americas the standout at +31% and now 44% of group revenue. Gross margin edged up to 64.2% and operating margin to 35%, helped by a 72% jump in Software Engineering revenues where chargeability was high.
Management flag that Software Engineering will normalise in H2 and costs will step up due to headcount and salary increases. Expect margins to ease in the second half, but the company still says it is on track to meet full year expectations despite currency headwinds.
Recurring revenue engine – ARR and NRR doing the heavy lifting
ARR was £41.6m, up 16%. That is the annualised value of subscription contracts. NRR of 112% means Alfa is growing spend from its existing base after accounting for downgrades and churn. This is boosted by new customers that ramp their subscription payments as implementations progress.
Subscription revenue rose 17% to £21.2m. Subscription customers total 41, including 23 on Alfa Cloud, with 16 live and 7 still in implementation. All told, subscription TCV rose to £145m at the half year, up from £129m in H1 2024.
Backlog and pipeline – TCV and late-stage deals
Total Contract Value sits at £211m, up 9% year on year, after peaking at £221m in December and then being worked down as projects moved into delivery. Importantly, the slice expected to convert within the next 12 months climbed to £90m, up 25%.
- Late-stage pipeline of 7 prospects.
- Alfa is the preferred supplier with 6 of them and is already working under letters of engagement.
- Nine customers upgraded to Alfa Systems 6, reinforcing the “frictionless upgrade” message.
Customer concentration has eased materially over the years. In H1 2025 there were 23 customers contributing more than £1m in the period, the top 5 accounted for 35% of revenue, and the largest customer represented 8% of last 12 months revenue.
Segment performance – what drove the half
- Subscription: £21.2m, up 17%. Momentum from both new and existing customers.
- Software Engineering: £10.3m, up 72%. Chargeable development for new customers jumped to £4.5m from £1.1m. Management expects a more normal level in H2.
- Delivery: £31.0m, up 10%. More implementations underway after the strong win rate in 2024.
On revenue timing, Delivery remains a mix of time-and-materials and over-time work, while subscription is largely recognised over time on fixed schedule. This blend provides good visibility but can make half-on-half comparisons a bit lumpy when large projects ramp or pause.
Cash, balance sheet and the 5.0p special dividend
Cash generated from operations was £22.0m and operating free cash flow conversion was a healthy 88%, within guidance of 80% to 90% for 2025. Net cash rose to £23.9m even after paying £11.2m of dividends in the half and £0.9m of share buybacks for option satisfaction.
The Board has declared a 5.0p special dividend, ex-dividend 25 September, record date 26 September, and payable 7 November. It is the tenth special in five years, underlining an approach of investing for growth while returning excess cash.
Product roadmap and addressable market expansion
Alfa invested £19.4m in software in H1, up from £18.8m, with focus on US Auto Originations, Fleet and Commercial Finance. The first two broaden the Serviceable Addressable Market within asset finance. Commercial Finance opens a longer term opportunity to serve stand-alone lenders, expanding the Target Addressable Market.
Alfa Systems 6 continues to roll out, with 11 upgrades delivered in H1 and nine customers now live on AS6. The company is also preparing Partner-led Delivery to scale implementations, and is expanding its Cloud hosting and engineering footprint with a new hub in Gdansk alongside Lisbon.
Headcount averaged 508, up 7%, with excellent 97% retention and engagement scores at 78%.
Geography and currency
EMEA delivered £31.2m, the Americas £27.2m and Rest of World £4.1m. Revenue contracted in GBP was £23.1m, with USD at £27.1m and EUR at £8.3m. FX hedging gains of £1.7m helped offset currency movements, but management still highlight currency headwinds in H2.
Risks and things to watch in H2
- Planned increase in headcount investment and salary costs will weigh on margins in the second half.
- Software Engineering revenue is expected to be lower in H2 after an unusually strong first half.
- Macro remains uncertain, though Alfa’s end markets have been resilient and the software is mission critical.
- New principal risk added: potential new US taxes on software or services supplied from outside the US.
- Ongoing core risks include people and skills, IT security and cyber, and competition.
My take – why this update matters
This is a high quality print. Revenue growth is broad based, cash generation is strong and recurring revenue metrics improved. The step up in next 12 months TCV to £90m supports visibility into H2 and 2026, while the special dividend signals ongoing confidence and disciplined capital allocation.
The key watchouts are the expected H2 margin drift as Software Engineering normalises and costs rise, and currency. None of that undermines the story, but it may make the 35% H1 margin a peak for the year. With nine AS6 customers live, subscription TCV building and customer concentration falling, Alfa looks well set to keep compounding.
If you want the company’s own presentation, an archived webcast is due on the Investors page: alfasystems.com/en-eu/investors.
