Alfa Financial Software (ALFA) 2019年年度報告「LSE」.pdf

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1、Delivering our strategyAnnual Report and Accounts 2019Alfa is a leading provider of software and services to the global auto and equipment finance industries.Our software platform combines three decades of expertise with the best in modern enterprise technology.Live across four continents,our class-

2、leading software platform is at the heart of some of the worlds largest and most innovative asset finance companies.Our implementations transform our customers businesses,and our delivery track record is exceptional.ContentsStrategic report2019 highlights 1At a glance 2CEO business review 4Alfa inve

3、stment case 7Our strategy 8Our differentiators 14Market overview 15Delivering our strategy People 22 Investment 24 Partnership 26 Our market 28Our business model 30Key performance indicators Financial 32 Operational 34Risks and uncertainties 36Principal risks and uncertainties 40Viability statement

4、44Financial review 46Environment,social and governance 54Engaging with our stakeholders 62GovernanceCorporate governance introduction 66Corporate governance report 68Board of Directors 76Company Leadership Team 78Report of the Nomination Committee 82Report of the Audit and Risk Committee 85Report of

5、 the Remuneration Committee 94Summary of the Directors remuneration policy 101Statement of Directors responsibilities 105Directors report 106Financial statementsIndependent auditors report 110Consolidated statement of profit or loss and comprehensive income 117Consolidated statement of financial pos

6、ition 118Consolidated statement of changes in equity 119Consolidated statement of cash flows 120Notes to the consolidated financial statements 121Company statement of financial position 151Company statement of changes in equity 152Company notes to the financial statements 153Additional informationGl

7、ossary of terms 158Useful information 1602019 highlightsGroup revenue64m71 million in 2018Adjusted EBIT margin(1)20%31%in 2018Cash balance 59m45 million in 2018Operating profit14m22 million in 2018Alfa team at 31 December 2019316employees312 at 31 December 2018(1)Adjusted EBIT is defined as profit f

8、rom continuing operations,before interest and income taxes,adjusted for capitalised costs relating to internally generated assets and the relevant amortisation costs on associated internally generated assets,with the Adjusted EBIT margin being Adjusted EBIT as a proportion of revenue.Strategic repor

9、tFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|1At a glanceEurope(including UK)We had 18 customers based in Europe,including three implementation customers as at 31 December 2019.Alfa Systems has been implemented and is live

10、in ten European countries,with a further expansion underway into eight countries over the next two years.We have further expanded our European operations recently by setting up a subsidiary in France.AmericasWe primarily operated and served customers in Michigan,Georgia and Virginia,generating 28 mi

11、llion of revenue in 2019.We have deep experience of the US automotive finance sector.Rest of WorldWe have operations in Australia,New Zealand and South Africa,and have 13 team members in this region specialising in both automotive and equipment finance.Software implementationWe had six ongoing imple

12、mentations at 31 December 2019 with an additional implementation having been completed in the later part of 2019.Software implementations vary in length and size depending on the complexity of the lending portfolio,the number of systems being replaced and the level of change management required.Duri

13、ng a software implementation,there may be a number of go-live events as different portfolios are migrated.Software implementation includes both implementation and development services.Implementation services include data migration,testing,configuration of customer-specific automated processes and re

14、porting.Development services include delivery of the related software licence and also the work to customise the underlying code for a customers requirements.41%of 2019 revenue (2018:43%)MaintenanceAt 31 December 2019,we had 25 maintenance customers.Maintenance pricing is based on countries or geogr

15、aphical areas in which Alfa Systems is being used,the number of finance contracts managed on Alfa Systems and types of assets.23%of 2019 revenue (2018:23%)Where we operate44%of 2019 revenue (2018:47%)49%of 2019 revenue (2018:49%)7%of 2019 revenue (2018:4%)Our revenue streamsOngoing development and s

16、ervicesODS represents additional services or development provided to customers after the go-live of the software implementation.36%of 2019 revenue (2018:34%)2|Alfa Financial Software Holdings PLC Annual Report and Accounts 201963%of 2019 revenue(2018:50%)21%of 2019 revenue (2018:27%)16%of 2019 reven

17、ue (2018:23%)BanksCustomers classified as banking institutions are finance entities associated with regulated banking groups.Original equipment manufacturersOEMs include both equipment and automotive manufacturers,whose main purpose is the sale of the asset rather than the provision of financing.Ind

18、ependentsIndependent customers are customers who are neither part of a regulated banking group nor manufacturers of the asset being financed.Independent customers tend to be smaller,both in portfolio volumes and personnel using Alfa Systems.Automotive financeThe automotive finance industry provides

19、a range of financial products to fund the acquisition of new and used vehicles.Our customers are banking institutions,OEMs and independent finance companies providing finance directly to consumers as well as through dealers.64%of 2019 revenue(2018:62%)36%of 2019 revenue(2018:38%)Our customer typesEq

20、uipment financeEquipment finance covers a myriad of asset types from vending machines,which are high volume,low value,to power plants which are low volume,high value.Alfas equipment finance offering is predominately a service lending for agriculture,manufacturing,mining,construction and transportati

21、on equipment.Historically,lending products on offer have been relatively traditional,Our industriesyet the equipment industry is seeing significant evolution towards consumption-based and subscription models.Generally,lenders classified as equipment financiers have a variety of assets under finance

22、in their portfolios and may have some automotive finance as well but this is not the predominant asset.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|3Trading performance and deliveryIn line with our revised ex

23、pectations,set out in our Trading Update issued on 16 September 2019,the Group recognised total revenue for the year ended 31 December 2019 of 64.5 million(2018 71.0 million).In securing 5.5m of contractual non-recurring revenue items in H2 2019,operating profit was boosted to 13.7 million(2018 22.4

24、 million).Alfa operated in challenging business conditions throughout 2019 with macroeconomic and political uncertainty contributing to reduced capital expenditure by customers.That,in turn,led to slower than anticipated implementations of certain projects and a reduction in customer spend on option

25、al upgrades and non-critical work.During the year,we increased our focus on cash management.Our operating free cash flow conversion for the year was 142%(2018:87%).We ended the year with a cash balance of 58.8m(2018:44.9m)and a strong,unencumbered balance sheet.We continued to provide implementation

26、 services for the four customers we were working on at the start of 2019.Of those,one OEM went live in three countries:Spain,in June 2019,Germany,in September 2019 and the UK,in November 2019.Separately,in September 2019,another OEM went live with an initial phase of their project,in Europe.In Novem

27、ber 2019,we signed a contract with one of the largest automotive finance providers in Germany where we had started implementation work,under a letter of engagement,early in 2019.In the same month,we announced an Alfa Start sale in the UK to Hampshire Trust Bank,a fast-growing challenger bank.In Marc

28、h 2020,Hampshire Trust Bank went live,just 19 weeks after we started implementation work.Since March 2019,we have been working for one of the largest banks in South Africa,under successive letters of engagement.In October 2019,we progressed from design to implementation work,and in March 2020,we sig

29、ned a contract to provide implementation and cloud hosting services.The core phase of an implementation project,for one of the largest US automotive finance companies,went live in January 2020.The culmination of a substantial and significant systems replacement project,spanning five years,this achie

30、vement further positioned Alfa as a compelling software choice for retail auto firms in the US.Hosting and subscription-based revenue streams,in connection with cloud-based installations,will be increasingly material in 2020 and beyond.In March 2020,we celebrated the hard launch of the global Alfa S

31、tart product line;and announced a new contract with an existing customer in the US auto industry.In the same month,we announced a second Alfa Start sale,to a fast-growing US-based automotive manufacturer,but this contract,which was lower tier in terms of value,was cancelled by the customer due to th

32、e economic downturn precipitated by Covid-19.Product development and innovationInvestment in the Alfa platform will always be at the heart of our corporate strategy.During 2019,the principal advances were in respect of cloud hosting,digital investment,the performance and scalability of Alfa Systems

33、and key new functional areas.The company is generating returns on previous years investment in cloud,which we continued in 2019.We have rebuilt our automated tooling for the management of customer environments to provide more security,scalability and simplification.This has generated significant add

34、itional capacity,which increases the number of production environments we are able to host.Our cloud service also offers an accelerator for customers who want to manage our service for themselves.This is in line with our general objective of speeding up implementation projects.CEO business reviewAnd

35、rew DentonChief Executive Officer The medium-and long-term prospects for Alfa remain compelling with a number of pipeline opportunities across our target markets.Those opportunities extend beyond our existing market segments,and our pre-configured Alfa Start offering and cloud-hosted solutions have

36、already attracted significant interest.At the time of writing,the extent of the impact of Covid-19 is necessarily uncertain.Implementation customers continue to see the benefits of installing Alfa Systems and our plans for 2020 remain substantially unchanged.”4|Alfa Financial Software Holdings PLC A

37、nnual Report and Accounts 2019The investment in digital solutions in 2018 and 2019 has resulted in the aforementioned go-lives in Spain,Germany and the UK of a React-based point of sale solution.This implementation was also the first deployment of a POSkit-based point of sale.POSkit is a toolkit of

38、point of sale software components that allows customised applications to be built quickly and efficiently.This approach has proven to work well,and we are in the early stages of further POSkit projects.We expect digitalisation to remain an important factor in customer purchasing decisions.Continued

39、development has enhanced Alfas library of APIs,as well as the development of mobile application functionality to support the full asset finance customer journey.We have partnered with industry-leading specialist suppliers to provide additional functionality such as customer identity verification,e-s

40、igning and direct payments.This development is an important part of ensuring the Alfa platform maintains its market-leading position.Beyond these developments,a number of functional enhancements to the platform are in progress including:Measurable improvements to all users experience;Development of

41、Cash Accounts functionality;Development of usage-based billing a key enabler for the industry trend towards servitisation and subscription models;and PostgreSQL support.We have also invested in research in artificial intelligence.An accompanying thought leadership campaign launched in H2 2019,and th

42、is work will continue in 2020.In 2020,we will continue to improve the user experience of the application,to maintain its leading position.We also have planned functional changes to support the replacement for LIBOR including SONIA in the UK;and ESTER,EONIA and SOFR in the US and improve the ease of

43、system maintenance,reducing the total cost of ownership for our customers and improving the efficiency of our Alfa hosting service.Alfa Start was first used in the US automotive finance sector in 2018.Building on this,in July 2019,we started small-scale development work to adapt Alfa Start to meet t

44、he requirements of the UK equipment finance market.This gave Alfa a ready-to-deploy repeatable solution based on a subscription-licensing model for smaller customers in our home market.A major focus for 2020 is to deliver our software,more frequently,and at a lower cost,to our customers.We are incre

45、asing our investment in modularisation.In the short-term,this will make the platform easier for us to maintain,as well as supporting longer-term opportunities in adjacent markets.We are also enhancing our software development lifecycle(SDLC).The tooling and process needed to make changes and deliver

46、 new,high-quality versions of Alfa needs to improve continuously.We will effect a number of changes to speed up feedback time,both of individual development changes,and from customers.This will ensure our development is more efficient by eliminating re-work and waiting times.Alongside these improvem

47、ents,the go-live in January 2020 for the large US automotive finance company,required the ability to manage 4.6 million active vehicle contracts.Through this implementation project,we delivered performance improvements and scalability of Alfa Systems.We anticipate this will provide substantial benef

48、its to all of our current and future customers.PartnershipsOur partnership programme is an important part of Alfas growth strategy.Throughout 2019,we made good progress in training partner staff and co-bidding for new projects.During 2019,we delivered induction training to 31 partner team members.At

49、 31 December 2019,six resource augmentation partner staff(2018:one)were supporting our efforts across three discrete projects and the late-stage pipeline contained two co-bids with systems integrator partners,including one bid that was already underway at the end of 2018.We will continue to build ou

50、r partner capability as these co-bids progress and as our partnership programme develops.Our total partner ecosystem now comprises five(2018:three)partners(including Genpact,Teamwill Consulting,Tellox Finansservice,and Accenture the latter being an agreement signed in February 2020).We are in discus

51、sions with further potential implementation partners.Board changes and governanceOur initial Non-Executive Directors,Richard Longdon,Karen Slatford and Robin Taylor,stood down from the Board during the year,having provided invaluable support and guidance through our transition from private to public

52、 company status.Additionally,David Stead had to stand down as a Non-Executive Director,due to restrictions on his availability.We were pleased to be able to appoint Chris Sullivan and Steve Breach as new Non-Executive Directors,in 2019.In March 2020,we announced that Adrian Chamberlain and Charlotte

53、 de Metz had agreed to join the Board after the release of our 2019 financial results.Our Non-Executive Directors collectively provide a strong combination of industry,strategic planning,and financial management knowledge and experience.Strategic reportFinancial statementsAdditional informationGover

54、nanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|5We strengthened the Executive Director team with the appointment of Matthew White to the Board,as Chief Operating Officer in October 2019.Vivienne Maclachlan stepped down as Chief Financial Officer,in April 2019,having pilote

55、d Alfa through our IPO,with John Miller joining as Interim Chief Financial Officer,in May 2019.In March 2020,we announced that Duncan Magrath would join the Board as Chief Financial Officer after the release of our 2019 financial results.On pages 66 and 67,we provide an assessment of the Companys pe

56、rformance against the UK Corporate Governance Code 2018(the“Code”)since 1 January 2019.In November 2019,BDO was selected to provide internal audit services.This followed a review by the Audit&Risk Committee(ARC)which concluded that the Company would be best served by engaging a new external provider

57、 to complement the work of the Companys Risk Manager.KPMG,the Companys previous external provider,resigned in August 2019.The Board continues to review the Companys procedures to ensure the Directors have a reasonable basis for making proper judgments on a continuing basis regarding the financial po

58、sition and prospects of the Group.As detailed in our H1 results announcement,as part of the Boards review process,in October 2019,the Company launched an improvement programme,led by John Miller.Good progress was made in the initial phase of the programme in the final quarter of 2019.Whilst prioriti

59、sing short-term improvements in the timely provision,and extent,of financial and operational information to the Board,the Company is also in the process of expanding the functionality of the recently implemented Finance and HR system,which,in the medium-term,will improve the provision of management

60、information.Leadership and employeesIn 2019,a new Company Leadership Team(CLT)was constituted.We took the opportunity to promote a number of staff with a deep understanding of their functional areas.The CLT has a combined total of 124 years of service at Alfa.We have supplemented this core Alfa and

61、industry experience with selective external recruitment and,in March 2020,we were delighted to welcome Vicky Edwards as our new Chief People Officer.Further details of the CLT can be found at pages 78-79.We spent considerable time during the year ensuring that business development was given sufficie

62、nt resource and leadership.As Chief Executive Officer,I provided this leadership directly for most of 2019 and business development will continue to be a key focus for me,through 2020.These efforts were reflected in the successful generation,progression and conversion of late-stage pipeline opportun

63、ities from late 2019,onwards.Our exceptional people will always be central to our efforts.We recruit talented people across the Company and provide them with the skills and environment to develop and succeed.We support their efforts with a full Environmental,Social and Governance(ESG)programme,Innov

64、ation Days and Learning and Development opportunities.2019 also saw the company focus on communication of strategy at all levels of the business and,entering 2020,we benefit from greater engagement in and understanding of,the Companys goals.2.Investment in our leading edge software to grow our marke

65、t sharePage 243.Partnership an important part of our ongoing growth strategyPage 264.Our market offering future growth for our leading digital solutionsPage 281.People at the heart of our businessPage 22Outlook for 2020At the time of writing,the extent of the impact of Covid-19 is necessarily uncert

66、ain.Apart from the aforementioned contract cancellation,we have received requests from some other customers to reschedule work,but at this stage we expect to be able to redeploy most of our people to satisfy other customer projects.We will continue to monitor and actively mitigate any challenges by

67、careful resource allocation.We are grateful to our people who have adapted with remarkable efficiency and professionalism to these unusual times.The full year effect of remuneration increases for our people,in November 2019,will be fully reflected in 2020s financial performance.Taken together with t

68、he impact of investment in Alfas future capabilities and one-off legal costs,there will be short-term pressure on Alfas margins.Beyond this,we will maintain rigorous cost control such that expenditure is only incurred to the extent that it is business critical and/or supports the growth of the compa

69、ny in the future.Above all our priority is to support our people,customers,partners and suppliers through the current crisis.Our implementation customers continue to see the benefits of installing Alfa Systems and our plans for 2020 remain substantially unchanged.We benefit from having a strong net

70、cash position with no debt.We are therefore in a position where we do not need to make reactive decisions,but can run the business to ensure that,when the crisis abates,we are in the strongest possible position for 2021 and beyond.Andrew Denton Chief Executive Officer23 April 2020CEO business review

71、 continuedTurn to page 8 to read more about our plan for growth and how this fits within our strategy6|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Alfa investment caseAlfa Systems is a leading software platform purpose-built for asset finance enterprises globally,developed to

72、 meet the current and future needs of the global asset finance industry.Uniquely positioned in a large addressable market with clear structural growth driversOur differentiated business modelWe have an established position of leadership in the asset finance software market,underpinned by our experie

73、nce and in-depth understanding of the asset finance industry.We are committed to growing our market share by maintaining and developing our leading-edge technology,surpassing customer expectations and winning new business in our target markets.Europe and the USA remain key markets for Alfa,contribut

74、ing 49%and 46%to revenue over the last three years,respectively.We have a number of late-stage pipeline opportunities across our target markets.With an excellent delivery history over three decades in the industry,Alfas track record is unrivalled.Our business model typically involves the sale and de

75、ployment of our asset finance software platform into large enterprises,which have highly complex and varying requirements.We are able to leverage our understanding of these complexities to enhance Alfa Systems a significant selling point for new prospects.Our Alfa Start methodology enables us to del

76、iver a subscription-based service rapidly to smaller,less complex customers.We have established a partner network that enables us to extend our operational capacity to integrate customers existing technology solutions and processes with Alfa Systems.Alfa Systems comprehensive functionality enables c

77、ustomers to automate critical business functions and enhance business agility.A strong balance sheet and financial position that supports all investment plansAlfa has a robust balance sheet position with 58.8m of cash (2018:44.9m)and no debt (2018:nil).We are highly cash-generative with impressive c

78、ash conversion of 142%(2018:87%).We have healthy recurring maintenance income and implementation and ODS revenues contracted under long-term statements of work.Leading-edge technology and consultancy proposition,reflected by deep long-term relationships and blue-chip customer listAlfa has invested s

79、ignificantly in the development of its technology platform to ensure it is secure,reliable,resilient and scalable to grow with our customers business ambitions.Our suite of integrated modules can be deployed and configured as a full end-to-end solution covering the entire asset finance life cycle or

80、 alternatively to provide standalone support for functional or product areas.Our hosted solution adds further value by reducing the need for customer IT training and infrastructure.Our strong,long-term customer relationships underpin Alfas significant revenue visibility as well as providing referenc

81、es for new prospects.Customers include Bank of America,Santander,Mercedes-Benz and Nordea.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|7Our strategic prioritiesOur strategyOur strategy for creating long-term

82、sustainable business valueOur purposeTo deliver our leading-edge technology with smart,diverse people,making our customers future-ready.Our valuesChallenge without being challengingWe do the right thing in service of the bigger picture.Use your knowledge and expertise to benefit others.Create a posi

83、tive impactWe want to make a difference for each other,our customers,and the communities we work within.Give something back.Let great ideas growWe believe that great things can come from anywhere.Have the confidence to share your ideas they will always be received.Make it better togetherWe believe e

84、verything can be improved through critical questioning.Whatever it is,ask yourself “how can it be better?”Our visionTo grow our company size naturally,but grow our impact rapidly,whilst maintaining our underlying culture.We will deliver more concurrent Alfa implementations,more efficiently,with a wo

85、rld-class product.We will have a big company impact,but a small company feel.Grow market share by maintaining leading-edge technology,increasing customer loyalty and winning new businessWe will retain our market-leading position and grow our share of the enterprise asset finance sectorRelated KPIs G

86、roup revenue New implementation projects Revenue on a constant currency basis R&D expense Number of customers HeadcountRelated RisksA B C D E F G H I J Develop our partner ecosystem to increase operational capacity and sales opportunitiesWe will work with a select group of partners to increase our d

87、elivery capabilities whilst maintaining qualityRelated KPIs Group revenue New implementation projects Revenue on a constant currency basis Number of customers Number of partner relationshipsRelated RisksA B C D E F G H I JOur strategy8|Alfa Financial Software Holdings PLC Annual Report and Accounts

88、2019Read more in Key performance indicators Page 32Read more in Risks and uncertainties Page 36Extend our best-in-class digital agendaWe will remain a market leader for digital solutions in the asset finance sectorRelated KPIs R&D expense New implementation projectsRelated RisksA B C D E F G H I JEs

89、tablish Alfa Start as the leading solution for the volume marketWe will become a market leader in the volume market of the asset finance industryRelated KPIs New implementation projects R&D expenseRelated RisksA B C D E F G H I JMaintain a high-performance organisation with a culture of continuous i

90、mprovementWe will continue to offer a supportive,diverse and collaborative working environment and be considered to be an employer of choiceRelated KPIs Headcount Retention rate Employee engagement Greenhouse gas emissionsRelated RisksA B C D E F G H I JPromote and grow value and develop resilienceW

91、e will deliver value to shareholders by building and extending long-term profitability in a cash-efficient mannerRelated KPIs Operating profit margin Adjusted EBIT margin Billings Operating free cash flow conversion R&D expenseRelated RisksA B C D E F G H I J RisksAFailure to retain or increase mark

92、et share in our strategic target marketsBHigh customer concentration riskCSocio-economic,geo-political riskDRisk to people,skills,location and working environmentEFailure to deliver on our existing implementation or ODS businessFFailure to develop Alfa Systems to ensure it remains relevant in the ma

93、rket,to lower the cost of development in the future and to allow competitive technological and product developmentGIT security and cyber risksHBusiness interruption or continuityIBrexit and uncertainty surrounding trading arrangements after the transition periodJPandemic outbreak in Alfa and/or cust

94、omer geographiesStrategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|9Our strategy continuedObjectivesProgress in 2019Focus for 2020 Grow market share by maintaining leading-edge technology,increasing customer loyalt

95、y and winning new businessWin in our existing markets by demonstrating capability of product and best-in-class deliveryMaintain our leading position as partner to the US automotive finance sectorGrow in target marketsDrive innovation in our existing solutionsLead with our cloud-first offering Used a

96、 cloud-first sales strategy with all prospects.Continued improvements to hosting,tooling and monitoring.Develop our partner ecosystem to increase operational capacity and sales opportunitiesEmbed partners into our sales and customer relationship processesSelect preferred partners and establish engag

97、ement termsDeliver training to partners and establish ongoing information exchange Four large partner intakes successfully onboarded.Partner portal set up.Provide further technical materials to partners for system integration efficiency.Extend our best-in-class digital agendaFocus on Alfa as a platf

98、ormDevelop value-adds to the platformThought leadership to demonstrate Alfa as a leading technology partner to the asset finance industryOur strategic priorities and objectives10|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Progress in 2019Focus for 2020 Hosted EMEA and US Use

99、r groups.Improvements to sales process.Maintain and increase focus on continuous improvement.Continued product roadmap enhancements(Integrations,Workflow,Performance).Continuation of the roadmap.Incorporate further feedback from implementations into delivery approach.Commenced three new implementati

100、on projects.Developed multiple sales opportunities and progressed some to late-stage pipeline.Further analysis performed confirming target markets.Deliver Alfa implementations and ODS projects.Win new implementation projects.Planned pieces used to maintain position as key thought leader.Continued re

101、search and development in relation to application of artificial intelligence(AI),machine learning and IoT.Monitor and increase take-up of innovation time.Generate pipeline of value-add work for existing customers.Used a cloud-first sales strategy with all prospects.Continued improvements to hosting,

102、tooling and monitoring.Engaged in three joint sales proposals.Partners utilised on four customer projects.Continued strengthening of our partner relationships.Deliver projects based on joint bids.Participate in further joint bids.Scale and leverage our existing partner ecosystem for staff augmentati

103、on.Established engagement terms with new partners.Add to our partner ecosystem(Global agreement with Accenture signed in February 2020).Four large partner intakes successfully onboarded.Partner portal set up.Provide further technical materials to partners for system integration efficiency.Delivered

104、further POS and self-serve applications.Investment in APIs,the user interface and target market features.Delivery of processing efficiency improvements at high-volume.Develop improvements to our integration capabilities.Further develop always-on,always-available strategy.Continue investment in user

105、experience and tooling.Further develop materials to support partner implementations and customers.Used a cloud-first sales strategy with all prospects.Support customers in move to Docker or Alfa hosting deployment model.Evaluate the potential for a new software-as-a-service product in an SME market.

106、Published position paper on AI and engineering blogs on React.Continue AI tooling development and collaborate with customers on practical use of AI.Assess and develop future business models in asset finance.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software H

107、oldings PLC Annual Report and Accounts 2019|11Our strategy continuedObjectivesProgress in 2019 Focus for 2020 Establish Alfa Start as the leading solution for the volume marketPromote simplification of delivery through our Alfa Start propositionPromote product simplificationWin customers in the volu

108、me market,based on Alfa Start propositionContinue investment model for volume market Developed process for assessing and managing investment return.Conduct further market analysis to inform strategic investment.Evaluate the potential for a new software-as-a-service product in the SME market.Maintain

109、 a high-performance organisation with a culture of continuous improvementRetain and attract the best people via a compelling value propositionProvide career development and learning opportunitiesEncourage inclusivity and diversityFoster innovation throughout the companyEncourage open communication a

110、nd strategic alignment Continued to use the Companys Purposes and Values as the foundations for strategic thinking.Regular communication e.g.from Investment Committee.Establish a team structure for strategy,including change management,to facilitate the upkeep of our strategy.Continue to engage throu

111、gh regular blogs,company meetings and open Q&A sessions.Review and revise based on engagement.Promote and grow value and develop resilienceImprove operational efficienciesImprove management information and controlReinvestment in the product to increase value for customers and prospectsAlign our glob

112、al locations with our growth potential12|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Progress in 2019 Focus for 2020 Extended Alfa Start proposition to new volume market segment.Maintain and increase a continuous improvement to Alfa Start delivery process and documentation.Ut

113、ilise feedback from implementations.Continuation of modularisation programme.Continuation of modularisation programme.Utilise feedback from first implementations and support to inform further changes.Developed pricing,sales and support model for volume market.Won a new Alfa Start customer.Deliver fo

114、r Alfa Start customers.New sales of Alfa Start.Continued development of sales approach.Developed process for assessing and managing investment return.Conduct further market analysis to inform strategic investment.Evaluate the potential for a new software-as-a-service product in the SME market.Succes

115、sfully reviewed and revised experienced engineering recruitment.Reviewed total reward package.Continue balanced recruitment for key geographies.Fill open executive team positions.Monitor working hours and increase take-up of training time,innovation time and ESG.Implemented new learning and developm

116、ent framework.Monitored uptake.Increase relevance,timeliness and take-up of training.Engage further senior staff in training delivery across Alfa.Developed a set of activities to improve diversity within Alfa.Embedded inclusivity/diversity in company events.Develop,execute and monitor plan to introd

117、uce diversity into leadership team and board.Expand discussions on inclusivity and diversity.Continued innovation days and hackathons.Provided recommendations for carbon offsetting following investigation of approaches that do not encourage us to“greenwash”.Renew innovation team charter,on-boarding

118、and training.Use UN Sustainable Development Goals to inform Alfa ESG efforts.Decide on carbon-offsetting approach and integrate into operating plans.Continued to use the Companys Purposes and Values as the foundations for strategic thinking.Regular communication e.g.from Investment Committee.Establi

119、sh a team structure for strategy,including change management,to facilitate the upkeep of our strategy.Continue to engage through regular blogs,company meetings and open Q&A sessions.Review and revise based on engagement.Continued focus on operating cost efficiencies to ensure that we have the capaci

120、ty to invest in new skills to drive future growth.Focus on improvements to project margins and capitalise on appropriate tactical opportunities.Increase proportion of income from licence revenues.Assigned further devolved budget holders.Implement improvements to internal systems to improve metrics a

121、nd information.Implement additional monitoring and feedback for budgeting.Invested in the user interface,expanded digital API and continuous improvement.Maintain and increase focus on continuous improvement.Revise the software development lifecycle(SDLC)to improve engineering efficiency.Continue to

122、evolve the user interface and user experience.Review our physical presence in line with market focus and add to our current office network if necessary.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|13Our diffe

123、rentiatorsThis is why our customers choose Alfa SystemsDelivery track recordInnovate and challenge in multiple marketsOur best practice methodologies and specialised knowledge of asset finance enable us to deliver large system implementations and highly complex business change projects.With an excel

124、lent delivery history over three decades in the industry,Alfas track record is unrivalled.Multi-entity,multi-regulatory,multi-currency and multilingual.We react quickly in a complex and changing market and adapt to match business requirements and customer needs as they evolve.Create an omnichannel e

125、xperienceWe empower customers,dealers and vendors through enhanced self-service and omnichannel technology.We operate with a clear and complete picture of the customer journey,from onboarding,throughout in-life management to end of term and retention.Perform through leading-edge techAlfa Systems has

126、 a comprehensive service-oriented architecture,100%web user interface alongside reliable,scalable performance,proven for a 10 million contract portfolio.Achieve operational agilityAlfa Systems helps streamline operations through process automation,across different functions and geographies.Customers

127、 achieve greater control,connected processes and a seamless flow of information.Unify systemsAlfa Systems helps customers avoid systems spaghetti consolidating disparate legacy systems,integrations and workarounds.Alfa Systems removes inefficiency and complexity by using a single platform with a sin

128、gle database.14|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Market overviewA complex and highly regulated market with many challenges and opportunitiesGlobal trendsAlfas global market remains attractive even in times of political and economic uncertainty.Asset finance has inc

129、reased security compared to unsecured loans,and the stability this provides means that the fundamentals of the industry tend to remain strong regardless of the short-term macro environment.Even so,change is a constant in todays commercial world,and asset finance is no exception.New regulations,such

130、as GDPR,WLTP,US Banking regulations and the drive for limiting dealer commission all mean that auto and equipment financiers must move quickly to protect their operations.At the same time,Brexit and global trade disputes have undoubtedly increased business uncertainty.Additionally the worldwide spre

131、ad of Coronavirus(Covid-19)will undoubtedly have far-reaching effects on all parts of the economy,and the full impact of the virus on the asset finance industry remains uncertain.Nevertheless,businesses must continue to plan even through this uncertain future,and put themselves in the best possible

132、position to operate effectively when Covid-19 has run its course.In order to succeed in an even more competitive future market,asset finance businesses must respond to an increasingly demanding customer base,and advances in technology that happen on an ever-shortening cycle.Demand for cloud solution

133、s,a fully digitised offer and use of artificial intelligence and machine learning are creating multiple opportunities for Alfa.In the automotive sector,the race towards electric and autonomous vehicles is well underway,forcing financiers to introduce new products and services.In the equipment sector

134、,financiers are also looking to find competitive advantage through innovative offerings such as pay-per-use billing.Despite increased uncertainty,including the uncertain impact of Covid-19,business decisions cannot be delayed indefinitely.The Alfa late-stage sales pipeline was increasingly healthy o

135、ver the course of 2019,with appetite for large-scale IT implementations returning across our markets,and we view prospects in the post-pandemic world with optimism.The full impact of the spread of Covid-19 on the asset finance industry remains uncertain.Nevertheless,businesses must continue to plan

136、even through this uncertain future,and put themselves in the best possible position to operate effectively when Covid-19 has run its course.”Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|15Market overview cont

137、inuedTechnology trendsCloudCloud deployments have become increasingly popular and on-premise deployment is now the exception rather than the rule.Cloud offers a wealth of benefits in terms of speed of set up,flexibility and cost management.Having more parts of the solution in the cloud also provides

138、 additional options to ease integration,and this is an increasingly significant factor in customers digital strategies.Larger finance providers have been slower to move to this new platform,often due to the perceived additional data governance risk.Improvements in security from cloud providers have

139、mitigated these concerns and we expect that the movement to cloud will continue.Use of Alfas hosting services is growing among customers,although some finance providers with mature IT servicing offerings are engaging directly with cloud providers like AWS or Azure to manage public cloud infrastructu

140、re themselves.Alfas approachAlfa Systems can be deployed on any cloud platform,improving customer experience and mitigating risks associated with being tied to a single provider.This,in turn,helps mitigate the risk that disruptors could become competitors in our customers markets.For three years,Alf

141、as recommended deployment has been via its hosted solution,and this offering provides a quick and easy option for customers to realise the benefits of cloud hosting without the need for significant technical skills.DigitalisationDigitalisation continues to be a popular theme,being discussed with inc

142、reasing frequency at industry conferences and in conversations with customers and prospects.An industry-wide agreed definition of the term remains elusive,though.In many cases,we see that prospective customers see“digitalisation”as a traditional systems uplift,replacing manual processes across multi

143、ple different legacy systems with a modern integrated solution like Alfa Systems.Others,including those who have already implemented Alfa Systems,are increasingly looking to achieve the next-level benefits of more integrated technology to solve business problems more efficiently.These customers are

144、seeking seamless digital connectivity,allowing for transformative solutions such as self-service mobile applications,customer portals and real-time links to third party providers.Ever-closer integration also requires systems to be easily connected,with a minimum of difficulty for those managing the

145、process.Developer Experience(“DX”)is therefore becoming as important as Customer Experience(“CX”)in choosing a system.Alfas approachAlfa has been a leading voice in the industry on digitalisation,releasing two white papers to give definition to the term and explain how its power can be harnessed.Alf

146、as digital strategy allows Alfa Systems to be deployed either as part of a connected systems landscape,or as a standalone system,as required.In particular,our continued investment in the open-platform API for Alfa Systems positions us well for a greater level of customer ownership of the digital jou

147、rney and to create a positive Developer Experience.10%of new cars could be offered as a subscription by 2025(a)Alfa has been a leading voice in the industry on digitalisation,releasing two white papers to give meaningful definition to the term and explain how its power can be harnessed”16|Alfa Finan

148、cial Software Holdings PLC Annual Report and Accounts 2019such as data analytic techniques for BPO and credit decisioning.Partly,this is due to the complexity of preventing the encoding of systemic biases:apparent bias in card credit decisions made the news recently in the USA,and avoiding bias is r

149、egulated under GDPR in Europe.Nevertheless,the prize for achieving successful machine learning application is as great in asset finance as in other industries,and we expect to see continued investment in this area over the coming years.Alfas approachIn 2019,Alfa released its first position paper:Bal

150、ancing Risk and Reward:AI in Equipment and Auto Finance.This covers some of the challenges of introducing machine learning into a business environment,whilst recognising the obvious benefits it can bring.Alfa will continue to perform its own research into how AI can be used successfully within asset

151、 finance during 2020,with a focus on launching applications that provide true value to Alfa and the asset finance industry.of equipment finance means a direct equivalent to car as a service is less likely,Dynamic Lease is likely to be the first of many such offerings.Alfas approachThe flexible natur

152、e of Alfa Systems has always positioned us well to manage new and complex product offerings.Structures like the Dynamic Lease product are already fully supported,and Alfa features such as variable billing cycles,customisable contract lengths,simply-effected changes of contract and independent views

153、of the asset all enable support not just for the products of today,but for future innovations.As with all ventures into new technology,there are risks and uncertainties involved in mobility solutions,and the timing and exact balance of future trends is uncertain.Alfa will continue to stay abreast of

154、 technological developments,provide thought leadership and innovative solutions to our customers and potential customers.AI and machine learningArtificial Intelligence and machine learning are increasingly common tools within business and their use and sophistication is likely to increase.In the ass

155、et finance industry,pilots and proofs of concept using AI and machine learning techniques abound,but production instances are limited.Efforts remain focussed on some traditional machine learning areas,Mobility and autonomous vehiclesMobility solutions remains an industry buzzword in the auto finance

156、 sector,but also stretches into equipment finance with OEMs exploring similar techniques.Car as a service is an increasingly likely future model in the medium term,with analysts suggesting that 10%of new cars could be offered via a subscription by 2025.(a)Typically,this will be for a specified car a

157、 monthly fee will provide the paying customer access to a car,with quick and easy options to change,or terminate,at any point.In comparison,we expect that there will be a slower take-up of car clubs,where a subscription would provide access to a fleet of cars and the ability to use any car,at any ti

158、me.Autonomous cars remain in some ways the end-state for mobility solutions,as this would even allow the driver to be provided as a service.While initial estimates of when autonomous vehicles will be on the road have been pushed back as understanding of AI and machine learning has increased,all the

159、major OEMs are putting significant investment into this technology and driver-assisted cars remain likely in the next five years.In the equipment space,Daimler Trucks has recently become the first provider to launch a usage-based lease,with its Dynamic Lease offering.This is an exciting development

160、in an industry that typically lags auto finance in innovation.While the business-to-business nature(a)Frost&Sullivan Future of Vehicle SubscriptionStrategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|17Partnerships/C

161、ollaborationRaise AwarenessRecruitmentEducation/TrainingAutomotive/FleetFinancialsDocumentationCalendar/EventsClarityAttentionDigital/ChannelsCustomer ExperienceInnovationEquipmentProfleAnalyticsBusiness InsightComplianceCommunicationsAgilitySystems ConsolidationColour/No CircleMarket overview conti

162、nuedEuropeOverallThe European asset finance market is heavily influenced by a small number of major economies,with the five largest European economies(UK,France,Germany,Italy,Spain)accounting for around 63%of vehicle and equipment finance originations(a).Growth across this market slowed in 2019 afte

163、r several years of sustained growth.Growth was modest in H1 2019,with only real estate leasing bucking the trend.Total new leasing volumes in the first half of 2019 were 183.1 billion,higher by 3.4%(b)than the same period of 2018.Until the outbreak of Covid-19,the outlook for the European industry o

164、verall remained positive,but growth will undoubtedly be impacted by the measures taken to combat the virus.In Alfas home market of the UK,the exit from the EU has been confirmed,but the specific impacts of Brexit are still being worked through and uncertainty continues to dominate.Brexit-related unc

165、ertainty continues to impact customers appetite for capital expenditure.Nevertheless,the demand for asset finance in the UK remains strong,with total new business growing in all but one month in 2019,and while Covid-19 will have an effect,the need for asset finance to help revive the economy should

166、help drive the requirement for IT projects.Alfas approachEurope is a key market for Alfa,contributing 49%of revenues over the last three years.Alfas experience of cross-border implementations and Alfa Systems flexibility positions us well for pan-European implementations for larger European automoti

167、ve and equipment finance companies.Additional mainland European subsidiaries in Germany and more recently France,increase our proximity to customers.183bnEuropean total leasing volumes in first half of 2019(b)49%Of Alfas revenue over the last three years4.3%Expansion of automotive leasing volumes in

168、 first half of 2019(b)3.1%Expansion of equipment leasing volumes in first half of 2019(b)AutomotiveVehicle leasing volumes expanded by 4.3%in the first half of 2019,although new passenger vehicle registrations were more static,with only a 1.2%growth compared to 2018(c).New business volumes in 2020 l

169、ook certain to be impacted by Covid-19,although to what extent is unclear.Manufacturers are increasingly looking to exploit the shift towards electric and autonomous cars,with companies joining forces where necessary to navigate this change.Diesel engines are particularly at risk,with the UK stating

170、 that these will be phased out by 2035.Outside the UK,consumers are particularly uncertain about the future of diesel engines:their poor green credentials are in direct opposition to their current economic benefits to the user,leaving buyers conflicted.However,this uncertainty could be a positive fo

171、r the finance industry,as consumers potentially shy away from long-term ownership of assets in order to avoid committing to a choice of fossil fuels or less-proven emerging technologies.18|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Partnerships/CollaborationRaise AwarenessRe

172、cruitmentEducation/TrainingAutomotive/FleetFinancialsDocumentationCalendar/EventsClarityAttentionDigital/ChannelsCustomer ExperienceInnovationEquipmentProfleAnalyticsBusiness InsightComplianceCommunicationsAgilitySystems ConsolidationColour/No CirclePartnerships/CollaborationRaise AwarenessRecruitme

173、ntEducation/TrainingAutomotive/FleetFinancialsDocumentationCalendar/EventsClarityAttentionDigital/ChannelsCustomer ExperienceInnovationEquipmentProfleAnalyticsBusiness InsightComplianceCommunicationsAgilitySystems ConsolidationColour/No CircleAlfas positioning as a modern digital platform gives cust

174、omers the ability to integrate easily into a complex systems landscape,providing end users with the ease of use that they require.EquipmentEquipment leasing expanded by 3.1%in the first half of 2019(b),continuing a pattern of single-digit growth over the past five years.This increase masks significa

175、nt variations,with markets such as the Baltics contracting by double-digits but markets as varied as Denmark,Greece and Ukraine experiencing significant growth.Covid-19 is likely to have a negative impact on the market,but businesses will need help in order to recover,and equipment financing may con

176、tribute towards this.Equipment finance is historically more conservative than automotive finance,but end users in the business-to-business sector increasingly demand the same kinds of products and solutions as consumers in the auto finance sector.Alfa expects this trend to continue through 2020 and

177、beyond,with customers across Europe seeking to gain competitive advantage by offering tailored solutions to brokers,vendors and direct customers.Alfas approachWith a proven track record in equipment finance,both in the UK and across Europe,Alfa continues to see great potential in this market,despite

178、 present uncertainty.Alfas ability to cover both auto finance and equipment finance on a single platform also positions us well to support demand for auto-style products and solutions in the equipment finance sector.In addition to continued support for large-scale pan-European implementations,Alfa i

179、s also placing a focus on providing a pre-packaged solution for smaller equipment finance players,starting with the UK market.With a proven track record in equipment finance,both in the UK and across Europe,Alfa continues to see great potential in this market.”Across the globe,captives are increasin

180、gly focused on mobility,enabling car buyers to finance vehicles in a way that best meets their individual needs.End user expectations are constantly evolving,with customers becoming increasingly tech-savvy.Alfas customers and prospects report that the ability to provide these customers with a slick

181、and simple customer experience will prove invaluable in retaining brand loyalty.Alfas approachThe strength of the Alfa Systems offering to the automotive finance industry is evident both in its work with UK and German auto finance companies,and in its market-leading status in the equivalent US marke

182、t.Regional variations make multi-country implementations difficult,but the configurable nature of Alfa Systems and its ability to support multiple products,verticals and jurisdictions on a single platform make it an excellent fit for large companies looking for economies of scale.(a)Leaseurope 2018

183、Statistical Enquiry(b)Leaseurope 2019 Biannual Statistical Survey(c)Europe Automobile Manufacturers Association press releaseStrategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|19USAOverallThe US administration rema

184、ins business-friendly and the economy continued to grow through 2019 and early 2020.Consumer spending,the foundation of the US economy,improved significantly and is a key driver of this economic growth.GDP has expanded by 2.1%over the past year(a)and the stock market finished 2019 near a record high

185、.The industry benefitted from a 25-basis-point interest rate cut by the Federal Reserve at the end of October 2019,the third time the Fed cut rates during the year,leaving the central banks benchmark rate at 1.5%to 1.75%at the end of the year.These positive signs were set against a backdrop of trade

186、 frictions with China and a pull-back in the US manufacturing sector;along with geopolitical uncertainty caused by Syria,Hong Kong and Brexit.As such,most measures of US business confidence were already well below 2018 highs and trending downward.Covid-19 has now increased those challenges significa

187、ntly,and the risk of recession that was already present has increased significantly.Whilst there will be storms to be weathered,Alfas customers will need to continue to invest in their businesses.This will put them in a good position to recover once the threat of Covid-19 has eased,and insulate them

188、 from any potential future further downturn.Alfas approachThe USA remains a key market for Alfa,contributing 46%to turnover for Alfa for the past three years.In 2020,our focus will be to continue working with the largest and most prestigious auto finance companies in the region.We will also expand a

189、nd diversify our customer base by working increasingly with US equipment finance companies and by servicing smaller portfolios in the auto finance market.AutomotiveAnnual US vehicle sales had stabilised at around 17.2m vehicles in the past few years.However,2019 sales dropped to 17.0m,and pre-Covid-

190、19 projections for 2020 and beyond showed a reduced level of 16.5m 16.8m vehicles(b):this will undoubtedly drop further unless a rapid exit from Covid-19 restrictions can create a bounce in H2 2020.Alternatively-powered vehicles remain a likely growth area but,at around 5%of total sales,this is not

191、currently a major segment.Auto finance volumes in 2019 remained at similar levels to 2018(c),with increased finance penetration driving a slight increase in finance volumes.The list of the top 100 auto finance providers has been fairly stable,but for the first time we are seeing disruptors rise up t

192、he table:providers such as Tesla and Carvana are growing fast with over 50%growth in portfolio value(c).The challenge for finance providers will be to keep auto finance volumes healthy in the face of reducing car sales volumes.Finance product diversification continues in order to tackle this,driven

193、largely by consumer buying habits and the large providers efforts to future-proof their portfolio offering.Current trends include:an increase in demand for white-labelling to drive efficiency;mobility and telematics;commercial fleet offerings;and second-life fleet solutions.Alfas approachAlfa is dee

194、ply entrenched in this market and we are the premium solution in the region.To cement our position as the market leader,Alfa continues to invest in implementation accelerators such as a best-in-class pre-configured solution and a cloud-first offering.The reduced implementation effort opens opportuni

195、ties for partnering and enables Alfa to target a larger section of the auto finance market.The flexibility of Alfa Systems means we are able to support new products offered by customers.We already have solutions for leases,loans,white-labelling,commercial fleet,usage-based contracts,second-life flee

196、t and many others.As the range of products diversifies further,Alfa will continue to be an attractive option for large,medium and disruptor customers.EquipmentEquipment finance volumes are expected to have grown by over 6%in 2019,from$894bn to over$950bn(d).This demonstrates the strength of the indu

197、stry and confidence that businesses had to invest in equipment in the year.17.0mNumber of US vehicle sales in 2019(b)6%Growth in equipment finance in 2019(d)Market overview continued20|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019OverallGeneral business confidence in Australia

198、 remained high through 2019,with the 2019 KPMG Global CEO outlook survey finding that 58%of Australias CEOs were very confident about their companys prospects over the next three years.However,although in 2019 Australia entered its 28th consecutive year without a recession,bushfires and Covid-19 wil

199、l have a significant impact on the economy,at least in the short-term.A rebound in the natural resources sector has driven up house prices in mining towns and also generated renewed activity in equipment leasing for yellow goods.At the same time new car sales have fallen consistently in the past two

200、 years,with finance penetration rates remaining largely static.The leasing market itself could change considerably over the Australia and New Zealandnext twelve months,as this period may see an increase in M&A activity among significant market players.In New Zealand much focus in financial services

201、has been on the Official Cash Rate(OCR),with a larger than expected 50bps reduction in August 2019:against this backdrop bank profits are flat.The leasing industry in NZ is estimated to have generated NZD4.7bn in turnover in 2017(e),with consistently rising revenues year on year.Rising tourism numbe

202、rs and an increase in construction,attributed to post-earthquake recovery activity in Christchurch,continues to drive turnover,although,as with other countries,Covid-19 will have a material impact on the local economy.Alfas approachIndustry leaders in Australia and New Zealand have highlighted poten

203、tial disruption from start-ups and the rise of peer-to-peer lending.Alfas strong commitment to R&D enables our customers to meet these challenges though product innovation and take advantage of changes in an increasingly dynamic market.As the leasing market gets more competitive it is apparent that

204、a number of lenders are feeling constrained by legacy systems,and are unable to take advantage of market opportunities.Alfa expects that this will drive an increase in software refresh activity over the next two to five years.58%Australias CEOs are very confident about their companys prospects over

205、the next three years(f)NZD4.7bnNZ leasing industry estimated turnover in 2017(e)However,trade frictions with China could dent equipment sales in areas such as farming and machinery.Further,the full impact of Covid-19 is not yet known and equipment finance is likely to experience at least a short-ter

206、m slowdown until the virus countermeasures are relaxed.Equipment finance has been very slow to embrace digitalisation,but the industry is starting to transition,driven by end-customer demand.Digitalisation is much more extensive than app-based customer service solutions,and includes connectivity of

207、the lenders systems with the asset,other systems,and end-customer information,to create the quality of customer journey demanded.The competitive landscape for equipment finance systems is being affected by one of the largest software providers in the market enforcing an upgrade to their extensive cu

208、stomer base.This is forcing customers to make a choice between upgrading or changing systems,creating opportunities for Alfa in 2020 and beyond.Alfas approachWith digitalisation requiring a modern real-time platform,the 70%of the market currently on legacy systems,or internally developed solutions,w

209、ill need to make changes to remain competitive.Alfa therefore anticipates acceleration in a software market that has remained slow for the past few years,once the effects of Covid-19 have been ameliorated.Our modern technical stack and digitalisation initiative positions us well to serve this market

210、.We also have a proven migration path from the systems of the aforementioned competitor enforcing an upgrade,meaning we are well placed to take advantage of this disruption.Partnerships/CollaborationRaise AwarenessRecruitmentEducation/TrainingAutomotive/FleetFinancialsDocumentationCalendar/EventsCla

211、rityAttentionDigital/ChannelsCustomer ExperienceInnovationEquipmentProfleAnalyticsBusiness InsightComplianceCommunicationsAgilitySystems ConsolidationColour/No Circle(a)US Bureau of Economic Analysis(b)MarkLines data center(c)Big Wheels Report 2019(d)Equipment Leasing and Finance Foundation 2019 Hor

212、izon Report(e)Westpac Industry Insight report into Equipment Rental and Leasing,May 2019(f)2019 KPMG Global CEO outlook surveyStrategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|21at the heart of our businessPeopleD

213、elivering our strategyStaff development and training is key to our future success and ensuring staff retentionOnce we find and recruit talented staff,it is important that we retain them by developing them to their full potential.One way we do this is to provide opportunities for innovation.We run a

214、number of company events throughout the year where time and space are given to work on projects people are passionate about.This is great for the business,as fantastic ideas grow from these events,and for our people as they have the chance to develop their ideas and then have a platform to present t

215、hem to the rest of the company,from teammates to Directors.We have witnessed excellent levels of engagement at these events which produce business benefits and,of equal importance,are fun for all involved.Visit to view a video of our 2019 Hackathon.The development of our people never stops.For insta

216、nce,in 2019 we made a number of internal promotions to our Company Leadership Team.In order to accelerate this transition,each person entered into a coaching programme with an external provider,helping them to adapt quickly to their new roles.22|Alfa Financial Software Holdings PLC Annual Report and

217、 Accounts 2019Retention A reduction in retention levels and an increase in salaries in the tech market in the past year led to a rigorous salary benchmarking exercise.This resulted in the company awarding salary increases that were above inflation in November 2019.This is an investment in our future

218、.If we want to attract and retain the best staff,we must offer a competitive remuneration package.This sits alongside the other things that make Alfa a great place to work:opportunities for varied and challenging work,a good work-life balance,our focus on learning and development and inclusive event

219、s.Recruitment 2019 has been a challenging year for recruiting software engineers in London.We are proud to have recruited 59 new employees over the course of 2019.A buoyant jobs market,coupled with associated wage inflation,resulted in Alfa exploring alternative options for sourcing candidates.We st

220、arted working with Makers Academy,a software development boot camp,and this has provided an excellent way to source a highly motivated and diverse pool of talented individuals.It is well documented that the tech industry lacks gender balance.Alfa is committed to greater female representation across

221、the company.Within our product engineering team,Makers Academy is a valuable partner helping us move towards that goal.We have also worked on enhancing our employer brand in the London tech market.Our aim is to build a high-quality candidate pool of potential employees,whilst reducing external recru

222、itment agency fees.Link to strategy5.Maintain a high-performance organisation with a culture of continuous improvementStrategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|23in our leading-edge software to grow our ma

223、rket shareDelivering a faster Alfa Systems,more efficiently,enabling our customers to generate value earlierAs customers drive their businesses harder and expect more access to information,Alfa Systems performance has been improved,continuing our journey to an always-available system.Simple deployme

224、nt models,such as cloud hosting and Docker containers,enable us to deliver Alfa Systems more efficiently and earlier,allowing our customers to focus on their business differentiators rather than infrastructure.Meanwhile,the same hardware handles more users and processes portfolios faster,improving t

225、he user experience.Investing in our whole engineering process,including our people,ensures that our onboarding,tools and infrastructure enable us to scale teams efficiently,whilst benefiting more from external expertise and leading-edge technology.Initial system modularisation effort has separated c

226、omponents and re-used them in new contexts.Our future investments will continue to focus on shortening the cycle from requirements to delivery ensuring that our customers receive the best service and are kept future-ready.Delivering our strategyInvestment24|Alfa Financial Software Holdings PLC Annua

227、l Report and Accounts 2019Link to strategy1.Grow market share by maintaining leading-edge technology,increasing customer loyalty and winning new business6.Promote and grow value and develop resilienceDigital agendaExpectations for connectivity continue to increase and we are accelerating our system

228、integration partners and customers use of Alfa Systems to support the whole customer journey.POSKit now supports new use-cases and has been delivered for both equipment and auto finance providers;Alfa Systems has expanded to include webhooks and simpler alternatives for using existing APIs;and the p

229、latforms rich feature-set has been leveraged for further in-life interactions,including with online payment processors.Investment will further standardise our documentation to provide ready-to-use examples and develop support for more use-cases.Our artificial intelligence tooling is already guiding

230、our engineers efforts and we will continue to collaborate with customers to provide further value from the rich data Alfa Systems provides.Concise,responsive,clearer user interfaceThe Alfa Systems user interface continues to evolve,using end-user feedback from our close customer relationships to pri

231、oritise investment.The refresh to leading-edge technology has improved user experience and eased training requirements,while the faster,more seamless transitions have increased productivity.Alfa is committed to continuing collaborations with our customers,including through hosted user groups,identif

232、ying opportunities to create meaningful improvements and a seamless experience on the platform.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|25enhancing our operational capacityOur partnership programme is a k

233、ey part of Alfas strategyStrategic alliances increase our operational capacity allowing us to deliver more Alfa Systems implementations,as well as enhance our ability to target new customers and markets.Our initial approach has been to augment our teams with partner staff and also work with Systems

234、Integrator partners,with Alfa retaining ownership of the customer relationship and delivery.This ensures our high standards of quality are maintained.We work with a small,carefully selected partner ecosystem of like-minded organisations with geographical spread and complementary delivery capabilitie

235、s.In 2019,we have scaled our partner relationships,successfully embedding partners in our project teams and our sales process.We have continued to invest in partner training,as well as providing onboarded partners with access to the latest information about Alfa Systems and our delivery methodology

236、via a partner portal.We have also grown our partner ecosystem,agreeing engagement terms with a specialist automotive finance consultancy and in 2020,with Accenture,the latter opening up opportunities for joint sales and collaboration on software implementations in multiple regions.In 2020,we will co

237、ntinue to scale our existing partnerships and evaluate other potential partners to strengthen further our partner ecosystem and core market coverage.PartnershipDelivering our strategy26|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Link to strategy2.Develop our partner ecosyste

238、m to increase operational capacity and sales opportunitiesSales collaboration helping to secure long-term growth in our project pipelineWe have two significant late-stage sales opportunities(one each in EMEA and the USA)where we are co-bidding with our partners,a very important step towards implemen

239、ting side-by-side at scale and securing long-term operational growth.Partners continue to provide local language and market expertise which is invaluable in the sales process,particularly with regards to new market entry opportunities.We have also benefited from increased sales channel opportunities

240、 via our partner relationships and the extended global reach and credibility they provide.Partner relationships 5(2018:3)Partner staff trained in 2019 31(2018:0)Onboarding partnersIn 2019,we developed our partner training and learning programme and have significantly increased our partner onboarding

241、.Through four intakes,partner staff have been taken through our comprehensive training schedule,including Alfa Systems training,our delivery methodology and simulation-based implementation workshops.Alfa subject matter experts and experienced practitioners have provided high-quality training and the

242、 best possible introduction to the company.In total we have onboarded 31 people from across our partner ecosystem in 2019.These partners have now assisted on four Alfa projects,for customers both currently live and at implementation stage,and they will enable us to scale up as we convert sales pipel

243、ine prospects.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|27Our marketoffering future growth for our leading digital solutionsContinuing to deliver to our core customers In 2019,Alfa continued to deliver imp

244、lementations across a broad range of customers and markets.Alfas largest projects are among the most high-profile and complex in our industry and we continued to meet major milestones on time during the year.The Alfa teams unique industry knowledge has enabled us to develop and deliver a range of in

245、novative products and technology solutions,generating operational efficiencies for our customers.Alfas commitment to regular product upgrades allows customers to benefit from new features and develop new capabilities to innovate in their markets.This platform for digitalisation is providing Alfa cus

246、tomers,unencumbered by the integration challenges of legacy technology,with significant competitive advantages.Along with these core projects our investment in project delivery for smaller customers has borne fruit,with Hampshire Trust Bank going live 19 weeks after the start of implementation work.

247、Further investment and experience in this area in 2020 will lead to an even more compelling,feature-rich product for the volume market.Delivering our strategy28|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019Market leadership Alfas long-term market leadership was further consoli

248、dated in 2019 as we worked with customers to deliver projects of unique scale and challenge.The platform continues to prove itself year after year,demonstrating its capabilities on the largest,most complex portfolios in the world.In addition,our approach to integrating with customer project teams ha

249、s allowed us to see challenges from the inside and help develop holistic solutions to complex problems which could not be achieved with a traditional external supplier relationship model.The commitment,knowledge and collaborative approach of Alfa team members,customers and partners is a true enabler

250、 for these super-large projects.Volume market Smaller finance companies often have the same requirements as larger customers for industry-leading technology and breadth of functionality.Through Alfa investment in developing preconfigured Alfa Start positions and hosting capabilities,we are now able

251、to offer such companies a highly streamlined deployment of Alfa Systems with rapid delivery timescales.Our implementation at Hampshire Trust Bank was completed in March 2020,after just 19 weeks.Link to strategy3.Extend our best-in-class digital agenda4.Establish Alfa Start as the leading solution fo

252、r the volume marketStrategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|29All supported by strong governance and robust risk managementOur business modelWe create value by delivering and supporting Alfa Systems which

253、 provides an end-to-end,smart and sophisticated solution for operators spanning the breadth of the asset finance industryOur resourcesHow we create valueTechnology Alfas continued product development and innovation creates opportunity.We provide a unique software platform that combines modern,disrup

254、tive technology with industry-leading functionality and reliability.People Our team works collaboratively with our customers teams to meet their business needs and strategic aspirations.Expanding our partner network will accelerate the evolution of our implementation capabilities and complement our

255、continued focus on delivery.Culture Our focus on excellence,agility and innovation ensures we are always at the forefront of the industry,providing solutions to regulatory and business challenges,digital needs and hosting solutions.Experience Our software is built specifically for the asset finance

256、industry and this,coupled with nearly 30 years of proven delivery capabilities,has given us deep experience and know-how.We work with a wide variety of customers,across geographies,cultures and markets delivering excellence in everything we do.Financial We aim to create stable commercial relationshi

257、ps which do not put our funding and liquidity at risk.Building long-term relationshipsThe life of an Alfa customer spans the initial needs assessment through to go-live,continued maintenance services and ongoing development and services work,across a myriad of asset types,geographies and lending pro

258、ducts.But it does not stop there customers often return to a needs assessment as their portfolio increases,their asset types expand and geographical reach increases.From proposal to end of term,across many asset types and financing structures.Software implementationIncludes implementation and develo

259、pment work for new customers and upgrades and geographical or asset type roll-outs for existing customers.Implement,develop and trainAssessmentREVENUE STREAMSUPGRADING AND INCREASING PORTFOLIOSInnovationR&PD and innovation30|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019The val

260、ue we create for stakeholdersOngoing development and services(ODS)Includes further functionality,development or process changes in response to new regulation and further change management as businesses grow.MaintenanceOngoing support for existing customers portfolios,including upgrades available on

261、a monthly,quarterly or biannual basis at a customers choosing,help desk support and other maintenance services.MaintainContinued value creationReinvestmentReinvestmentInternational Integrated Reporting Councils capitalsThis key provides a mapping to the“capitals”of the IIRCs Integrated Reporting(IR)

262、Framework.You can find out more at:theiirc.orgShareholdersEPS(basic)3.5p(2018:6.3p)CustomersDelivery over last 3 years7 software implementations(2018:6)Alfa teamRetention 83%(2018:88%)ProductInvestment in Research&Development15.2 million(2018:16.3 million)Brand coverageCountries 26(2018:26)Communiti

263、es and societyMoney raised35,000(2018:47,000)Carbon emissions 821 tCO2e(2018:890 tCO2e)Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|31 Financial Human Manufactured Intellectual Social NaturalFIHSMNRisksAFailu

264、re to retain or increase market share in our strategic target marketsBHigh customer concentration riskCSocio-economic,geo-political riskDRisk to people,skills,location and working environmentEFailure to deliver on our existing implementation or ODS businessFFailure to develop Alfa Systems to ensure

265、it remains relevant in the market,to lower the cost of development in the future and to allow competitive technological and product developmentGIT security and cyber risksHBusiness interruption or continuityIBrexit and uncertainty surrounding trading arrangements after the transition periodJPandemic

266、 outbreak in Alfa and/or customer geographies20192018(16)20179(11)2019 performance Constant currency decline is marginally higher than actual revenue reduction,following devaluation of GBP against USD and EUR during 2019.Focus in 2020 Growing Group revenue as described above;and Managing the impacts

267、 of foreign exchange fluctuations.Why do we measure this?Revenue and customer base growth.Demonstrates underlying organic growth excluding the impacts of currency movements.Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I J2019201812017232019 performance Three cu

268、stomers began new implementation projects in 2019,of which two signed up to our new subscription-based invoicing model,including one utilising our Alfa Start proposition.Focus in 2020 Convert late-stage sales pipeline opportunities in Europe and USA.Why do we measure this?Revenue and customer base g

269、rowth.New sales is a measure of success with customers and is an indication of future growth.New customers defined as implementation work started in year.Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I JNew implementation projects3201964.5201871.0201787.72019 pe

270、rformance Group revenue has been impacted by delays to anticipated implementation projects and reduced discretionary spend by customers.Focus in 2020 Convert late-stage sales pipeline opportunities in Europe and USA;Continue implementation activities at existing customers;and Hosting and cloud oppor

271、tunities.Why do we measure this?Revenue and customer base growth.Growing revenue is a measure of customer success.It is central to our objective of becoming the number one supplier to the asset finance industry.Linked to remuneration:YesLinks to strategic priorities:Link to risk:A B C D E F G H I JG

272、roup revenue64.5mRevenue on a constant currency basis(11%)Key performance indicatorsOur strategic prioritiesFinancial Measuring our performanceAlfa measures a range of financial and non-financial metrics to help manage business performanceGrow market share by maintaining leading-edge technology,incr

273、easing customer loyalty and winning new businessDevelop our partner ecosystem to increase operational capacity and sales opportunitiesExtend our best-in-class digital agendaEstablish Alfa Start as the leading solution for the volume marketMaintain a high-performance organisation with a culture of co

274、ntinuous improvementPromote and grow value and develop resilience32|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019201920201831201747*2019 performance Adjusted EBIT margin affected by revenue decreases and a higher cost base,including increased staff costs in a competitive marke

275、t for software engineers.Adjusted EBIT also adjusts for capitalised costs relating to internally generated assets and the relevant amortisation costs on associated internally generated assets.This explains why this KPI is slightly lower than the related Operating Profit margin.Focus in 2020 Control

276、margin erosion by ensuring costs are incurred only to the extent necessary to support future business growth.Why do we measure this?Promote and grow value and develop resilience.Adjusted EBIT margin shows the full underlying cost of developing Alfa Systems,whilst removing the impact of non-recurring

277、 expenditure to assess how effectively we are delivering Alfa Systems and related services to customers.Linked to remuneration:YesLinks to strategic priorities:Link to risk:A B C D E F G H I JAdjusted EBIT margin20%2019212018322017392019 performance Operating profit margin affected by revenue decrea

278、ses and a higher cost base,including increased staff costs in a competitive market for software engineers.Focus in 2020 Control margin erosion by ensuring costs are incurred only to the extent necessary to support future business growth.Why do we measure this?Promote and grow value and develop resil

279、ience.Operating profit is a measure of how effectively we sell Alfa Systems and manage our cost base.Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I JOperating profit margin21%20191422018872017692019 performance Cash conversion ratio improved through increased f

280、ocus on cash management by the Group and higher billing amounts compared to the Group revenue for 2019.Focus in 2020 Cash flow conversion of 100%Why do we measure this?A strong,unencumbered balance sheet position is key to growing the business in the future.Our business has always been cash-generati

281、ve and this KPI allows us to monitor cash flows throughout the year before investment in capital projects.Linked to remuneration:YesLinks to strategic priorities:Link to risk:A B C D E F G H I JOperating free cash flow conversion142%2019 performance Billings are higher than revenue due to the deferr

282、al of customised licence revenue recognition and certain contractual settlement and termination amounts being billed during 2019 which related to revenue recognised in prior years.Focus in 2020 Maintain billings of 95%of revenueWhy do we measure this?To seek to maintain a strong balance sheet positi

283、on(initially through trade and other receivables and subsequently through cash following collection)ability to turn billings into cash demonstrates cash flow and growth in the underlying business.Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I JBillings71.1m2019

284、71.1201866.5201776.8201915.2201816.3201714.02019 performance Alfa capitalised 1.1 million in 2019 in relation to:Continued investment in our products digital capabilities;Upgrades and improvements to usability and functionality of the Alfa Systems user interfaces;Investment in the functionality of t

285、he cloud-hosting platform offered by the Group;The adaptation of the existing Alfa Start technology to meet the requirements of the UK equipment finance market;and Specific functionality requested by existing customers for which the Group has invested internally generated time developing new modules

286、 and capabilities within Alfa Systems.Focus in 2020 Continue to deliver on modularisation,our digital agenda and improve user experience along with functional changes to support the replacement for LIBOR in both the UK and the US and to improve the efficiency of our Alfa hosting service.Why do we me

287、asure this?Product investment.Quantification of the cost spent investing in research and development of Alfa Systems,demonstrating continued evolution and focus on change.R&D expense15.2mLinked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I J*The 2017 Adjusted EBIT wa

288、s calculated before one-off pre-IPO related expenses and pre-IPO share scheme cost.Refer to the reconciliation on page 35 for further details.Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|332019262018272017322

289、01982120188902017690201945.761.22018201952018320173Number of partner relationships5Key performance indicatorsOperational2019 performance Two new customers signed in 2019,being a South African bank and Hampshire Trust Bank,our first Alfa Start implementation in the UK.Metric removes customers who ter

290、minated in year or who have given notice to terminate in 2020.Focus in 2020 Grow customer numbers and broaden diversification across geographies and industries.Why do we measure this?Revenue and customer base growth.Increasing the number of customers helps to grow our share of the total addressable

291、market and also protects us against customer concentration risk in the medium term.Number of customers26Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I J2019 performance Headcount increased due to recruitment across the business in anticipation of expected 2020

292、activity levels.Focus in 2020 Increase headcount as we close out late-stage pipeline opportunities.Why do we measure this?Revenue and customer base growth.Our growth and ability to win new business is partially dependent on the number and deep expertise of our people and therefore growing our team f

293、or the future is key to this goal.201931620183122017329Headcount316Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I J2019 performance Retention rate fell as the market for software engineers became more competitive.Metric excludes any managed attrition.Focus in 2

294、020 Retention of 90%.Why do we measure this?Engagement of people.Our deep expertise in the industry and our ability to service our customer relationships is driven by the quality of our people.A higher retention rate demonstrates sustained engagement and retention of key skills and knowledge.2019832

295、01888201795Retention rate83%Linked to remuneration:YesLinks to strategic priorities:Link to risk:A B C D E F G H I J2019 performance This KPI was added in 2018 as employee engagement is a positive indicator of culture and has an impact on business performance.Extracted from bi-monthly employee Pulse

296、 survey,questions asked are“Would I recommend Alfa to a friend as an employer”,“I am happy with Alfas strategy and business goals”and“Alfa has an excellent atmosphere and culture.”The decrease in the average employee engagement during 2019 has been a focus by senior management in the second half of

297、2019 and employee engagement levels have grown significantly from Q4 2019 to the date of this report.Focus in 2020 Increased engagement from employees by providing a stimulating,challenging and appropriately rewarded working environment.Why do we measure this?Measures levels of employee engagement b

298、ecause there is a positive correlation with business performance and the metric should be a lead indicator for retention rate performance.Employee engagement45.7%Linked to remuneration:NoLinks to strategic priorities:Link to risk:A B C D E F G H I J2019 performance Discussions with a further three p

299、otential partners continued,in anticipation of joint working relationships from sales pipeline.Focus in 2020 Successfully announced new global partnership agreement with Accenture.Continue to grow and utilise partner ecosystem.Why do we measure this?Revenue and customer base growth.The profitable gr

300、owth of our business is also linked to our ability to increase operational capacity.Our relationships with partner organisations provides introductions to potential customers and also provides resource augmentation and system integration capabilities.Linked to remuneration:NoLinks to strategic prior

301、ities:Link to risk:A B C D E F G H I J2019 performance We have continued to monitor our level of carbon emissions and seek opportunities for further reductions.Focus in 2020 Move towards neutral environmental impact through comprehensive review of total carbon emissions and identify and implement st

302、rategies for reduction.See our ESG section for more info on page 58.Why do we measure this?Responsible operations.We are committed to a position of carbon neutrality through assessing our carbon footprint and emissions to include a review of flights and energy usage.Linked to remuneration:NoLinks to

303、 strategic priorities:Link to risk:A B C D E F G H I JGreenhouse gas emissions per 1,000 square feet(tCO2E)82134|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019(4)Adjusted EBIT marginAdjusted EBIT in 2019 is defined as profit from continuing operations before interest and income

304、 taxes,adjusted for capitalised costs relating to internally generated assets and the relevant amortisation costs on associated internally generated assets,with the Adjusted EBIT margin as a proportion of revenue.Previously management defined Adjusted EBIT as profit from continuing operations before

305、 income taxes,finance income,pre-IPO share-based compensation and IPO-related expenses,with the Adjusted EBIT margin as a proportion of revenue.In 2019,management updated this definition because the IPO-related expenses and share-based compensation costs were only relevant in 2017,the year in which

306、the Company undertook its IPO.Management utilises this revised measure to monitor performance as it illustrates the underlying performance of the business by adding back capitalised costs,net of relevant amortisation,which management believe is reflective of the underlying cost base and overall trad

307、ing operations.The table above reconciles Adjusted EBIT to profit for the year.(5)Operating free cash flow conversion Operating free cash flow is calculated as cash from operations,less gains and losses on settlement of derivative instruments and margin calls,less capital expenditures,less total lea

308、se payments in respect of IFRS 16(which was applied for the first time in the year ended 31 December 2019)and adding back IPO-related expenses.Operating free cash flow conversion represents Operating free cash flow generated as a proportion of Adjusted EBIT.Management uses Operating free cash flow c

309、onversion to monitor and manage cash flows.The table below presents a reconciliation of Operating free cash flow to Cash generated by operations,which is the nearest measure defined by IFRS.Definition and method of calculation of KPIsIn considering the financial performance of the business,the Direc

310、tors and management use key performance indicators,some of which are defined by IFRS and some of which are not specifically defined by IFRS.We believe that Billings,Adjusted EBIT,Adjusted EBIT margin and Operating free cash flow conversion are the key measures required to assess our financial perfor

311、mance.They are used by management to measure liquidity,in the case of Billings and Operating free cash flow conversion,and profitability in relation to Adjusted EBIT and Adjusted EBIT margin.These measures are not defined by IFRS.The most directly comparable IFRS measure for Adjusted EBIT is our Pro

312、fit from continuing operations and for Operating free cash flow conversion it is Cash flows from operations.These measures are not necessarily comparable to similarly referenced measures used by other companies.As a result,investors should not consider these performance measures in isolation from,or

313、 as a substitute analysis for,our results of operations as determined in accordance with IFRS.The method of calculation for each metric is as follows.(1)HeadcountRepresents the number of Alfa employees under contracts of employment as at 31 December of each year.(2)Retention rateRepresents the reten

314、tion of Alfa employees over the previous 12-month period,excluding any managed staff attrition.(3)BillingsThese are amounts invoiced in year.This differs from revenue as defined by IFRS due to the release of deferred income in relation to licence payments and maintenance agreements and accrued incom

315、e in relation to work in progress and other contractual amounts due from customers.Adjusted EBIT2019 000s2018 000s2017 000sProfit for the year10,18218,15025,866Adjusted for:Taxation2,8184,3067,996Pre-IPO employee share schemes(1)4,400IPO-related expenses(2)3,000Finance income(143)(74)(33)Finance exp

316、ense852Adjusted EBIT 2018 definition13,70922,38241,229Capitalised development costs(1,135)(407)Amortisation of capitalised development costs153Adjusted EBIT 2019 definition12,72721,97541,229(1)Relates to pre-IPO employee share scheme expense.(2)Relates to IPO-related expenses which are determined to

317、 be non-recurring.000s201920182017Cash generated by operations22,54820,95428,853Adjusted for:Settlement of derivative financial instruments and margin calls(108)(2,683)Capital expenditure(2,076)(1,638)(663)IPO-related expenses excluded from Adjusted EBIT3,000Total lease payments in respect of Right-

318、of-Use Assets(2,462)Operating free cash flow18,01019,20828,507Adjusted EBIT 2019 definition12,72721,97541,229Operating free cash flow conversion142%87%69%Strategic reportFinancial statementsAdditional informationGovernanceAlfa Financial Software Holdings PLC Annual Report and Accounts 2019|35How we

319、monitor risk Identify risksWhilst overall responsibility for risk lies at Board level,the Directors have delegated authority for risk identification to the CLT.A bottom-up approach has primarily been undertaken to provide a detailed review of risks by relevant business owners and this is led by the

320、Risk Officer,twice a year.The output is then reassessed by the CLT to provide assurance over completeness of the risk register.Define risk appetiteOur systems and processes are designed to manage our exposure to risk rather than eliminate risk completely.Therefore the Audit and Risk Committee,with t

321、he CLT,reassesses the Groups risk appetite each year with this in mind.The Audit and Risk Committee considers the risks associated with the conduct of our business and the delivery of our strategy,assessing the risks we are exposed to and evaluating whether this exposure is acceptable given the like

322、lihood and severity of the risk.Assess and quantifyRisks are assessed to understand the likelihood and the impact of the risk crystallising.We assess these by considering the possible impact on the following areas:Financial;Operational;Reputational;and Legal/compliance.Respond,manage and mitigateEac

323、h risk is reviewed,twice a year.At each review date,the existing controls are reviewed for adequacy and effectiveness.Due to the ever-changing business landscape and the industry we work in,it is quite possible for the control requirements to change and for processes and policies to require updating

324、.If this is the case,then a business owner is identified and they are responsible for implementing changes.Monitor and reviewManagement monitors progress against the principal risks.This has been shared with our internal auditors,BDO,to assist them form the internal audit plan for 2020.The Board rev

325、iews the summary risk register and assesses the adequacy of the principal risks identified,as well as the mitigating controls and procedures which are in place.IntroductionWe recognise that managing risk effectively is integral to executing our strategy.We have therefore implemented a five-step proc

326、ess for monitoring and managing risk throughout our business,allowing the Directors to conduct a robust assessment of the principal risks facing the Group.Risk is not something that should be eliminated but,instead,identified,assessed and managed in a timely manner.Risk management is integral to del

327、ivering our strategic objectivesIn order to deliver our strategy and achieve excellence through our business model,both operationally and financially,we must ensure we maintain the right balance between safeguarding against potential risks and taking advantage of potential opportunities.Our aim is t

328、o foster a culture of effective risk management by encouraging appropriate and monitored risk-taking in order to achieve the Groups strategic priorities.Our key strategic priorities are:1.Grow market share by maintaining leading-edge technology,increasing customer loyalty and winning new business;2.

329、Develop our partner ecosystem to increase operational capacity and sales opportunities;3.Extend our best-in-class digital agenda;4.Establish Alfa Start as the leading solution for the volume market;5.Maintain a high-performance organisation with a culture of continuous improvement;and6.Promote and g

330、row value and develop resilience.We operate within various different geographical markets,each with their own potential diverse risks attached to them.It is therefore imperative that we assess and manage risks across each of these markets to ensure we have assessed all risks appropriately.Our custom

331、ers remain at the centre of everything we do and depending on the customer profile,they may be impacted by different regulatory,legislative and business requirements and challenges.Our diligent approach to risk management means,we take into account the relevant implications for our business.Risks an

332、d uncertaintiesEnsuring effective risk identification and management36|Alfa Financial Software Holdings PLC Annual Report and Accounts 2019GIT security and cyber risksHBusiness interruption or continuityIBrexit and uncertainty surrounding trading arrangements after the transition periodJPandemic out

333、break in Alfa and/or customer geographiesAcceptable risk appetiteAFailure to retain or increase market share in our strategic target marketsBHigh customer concentration riskCSocio-economic,geo-political riskDRisk to people,skills,location and working environmentEFailure to deliver on our existing implementation or ODS businessFFailure to develop Alfa Systems to ensure it remains relevant in the ma