Alfa Financial Software (ALFA) 2023年年度報告「LSE」.pdf

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1、Forward,with purposeAlfa Financial Software Holdings PLC Annual Report and Accounts 2023 Keep up-to-date with our news at Alfa is a leading provider of software and services to the global auto and equipment finance industries.We deliver our leading-edge technology with smart,diverse people,making ou

2、r customers future-ready.Strategic report1 Highlights of the year2 At a glance4 What Alfa does6 Investment Case7 CEO Q&A8 CEO review12 Market overview14 Business model16 Strategy in action26 Key performance indicators28 Financial review32 Risk management36 Principal risks and uncertainties45 Viabili

3、ty statement 48 Engaging with our stakeholders48 Section 172 Statement54 Environmental,Social and Governance70 Task Force on Climate-Related Financial Disclosures(TCFD)ContentCorporate governance75 Chairmans introduction78 Board of Directors80 Company Leadership Team81 Our governance framework83 Div

4、ision of responsibilities 85 Board leadership and Company purpose88 Composition,succession and evaluation91 Nomination Committee Report95 Audit and Risk Committee Report103 Directors Remuneration Report106 Directors Remuneration Policy115 Annual Report on Remuneration129 Directors report134 Statemen

5、t of Directors responsibilitiesFinancial statements136 Independent auditors report144 Consolidated statement of profit or lossand comprehensive income145 Consolidated statement of financialposition146 Consolidated statement of changesinequity147 Consolidated statement of cash flows148 Notes to the c

6、onsolidated financialstatements184 Company statement of financial position185 Company statement of changes in equity186 Notes to the Company financialstatements191 Five year historyOther information192 Shareholder informationAbout Alfa Awards 2023 Diversity Focused Company through Corp!Magazines 16t

7、h annual Salute to Diversity Awards Winner in the Social category at the Asset Finance ConnectSummer Awards Newsweeks Most Loved Workplace Monitors Most Innovative CompaniesESG2019202020212022202364.5m102.0m93.3m83.2m78.9m20192020202120222023(11%)9%8%9%22%2019202020212022202383%97%90%87%93%201920202

8、0212022202355%82%84%78%74%2019202020212022202313.7m30.1m29.6m24.7m23.9m2019202020212022202321%30%32%30%30%2019202020212022202361%35%35%38%48%2019202020212022202325353231282019202020212022202358.8m21.8m18.7m23.1m37.0m2019202020212022202319.7m22.5m32.7m44.2m0mGroup revenue(m)Revenue growth at constant

9、 currency(%)Employee retention(%)Employee engagement(%)Operating profit(m)Operating profit margin(%)Customer concentration (top 5)(%)Number of subscription customers Cash(m)Dividends paid(m)1Strategic reportCorporate governanceFinancial statementsOther informationHighlights of the year Alfa Systems

10、is at the heart of some oftheworlds largest and most innovative asset finance companies.Supporting all types ofauto,equipment and wholesale finance business,oursoftware platform uses leading-edge digital technologies to deliver proven functionality and performance.Our purpose and identityTo deliver

11、our leading-edge technology with smart,diversepeople,making our customers future-ready.Weareasoftware and delivery company.Our visionTo grow our company,and to grow our impact faster than our headcount,whilst retaining our culture.Key to achieving this is delivering more concurrent Alfa implementati

12、ons,more efficiently,with our world-class product.We will have a big company impact,buta small company feel.Our valuesOur values are central to the way we work,bothtogetherandwithour clients.Alfa Financial Software Holdings PLC Annual Report and Accounts 20232At a glance31.8mrevenue 15.6mrevenue 54.

13、6mrevenue vDiversified customer base at the heart of Alfa resilienceWhat we doSubscriptionsSubscription services are regular payments which cover licence,maintenance and Alfa Cloud.13live hosted clients16%growth in revenueSoftwareThe strength of our software lies not only in the years of knowledge a

14、nd experience that have been poured into it,but that it was designed for the digital environment.ServicesThe quality of our people,the knowledge sharing embedded in theorganisation and the inherent IP within our software mean that our delivery record is second to none.13new versions released35delive

15、ries37customers6new implementationsLive in South Africa with consumer and commercial finance portfolios2 of Australias top 5 asset finance lenders3 of the USs top 5 autolenders2 of the USs top 3 equipmentlessors3 of the UKs top 5 equipment lessorsLive portfolios across 19 European countriesWhat we d

16、o3Strategic reportCorporate governanceFinancial statementsOther informationAlfa Systems satisfies requirementsofall sizes:as an integrated point solution,a rapid off-the-shelf implementation,or anend-to-end platform for the complex global enterprise.Alfa Financial Software Holdings PLC Annual Report

17、 and Accounts 20234What Alfa doesPeopleAlfas people:the best in the business.We put our performance prowess down to our project teams.In choosing Alfa,customers benefit from some of the brightest people in the industry,with unrivalled understanding and experience.A passion for sustainability.Ever si

18、nce the Company was founded,Alfahas focused on creating a positive,sustainable impact on society through social and environmental activities,as well as responsible development.The Alfa Systems software platform is continually enhanced to address the industrys green challenges and opportunities.Deliv

19、eryAn unrivalled track record inprojectdelivery.With more than 30 blue-chip customers and over 100 portfolio migrations,wemaintain exceptional customer satisfaction and always deliver on projectobjectives.Our customers stickwith us for the long term.Rapid,preconfigured delivery model.Using a predefi

20、ned,best-practice configuration and process catalogue,theAlfa Start methodology delivers AlfaSystems rapidly and at entry-level cost,allowing asset finance operations ofall sizes to take full advantage of our market-leading software platform.ProductFunctional depth that eclipses our rivals.Alfa Syst

21、ems offers exceptional functional depth and a bulletproof accounting engine,developed together with Alfas customers over our 30+years in the industry.Our customers benefit from complete application ownership,enabling total control of the contract lifecycle,as well as all matters of configuration and

22、 integration.Ensuring stability,scalability and robust performance,Alfa Systems just works.Proven,time after time.Live with more than 30 current customers and in 37 countries,Alfa Systems is proven with customers large and small,atvolume,at great complexity,and across borders.Our status as a PLC pro

23、vides transparency and financial robustness,enabling us to deliver excellence for customers in the long term.Cloud-native and secure Software-as-a-Service.The Alfa Cloud hosting service deploys our software platform securely in the AWSpublic cloud,providing geographical flexibility and rapid deploym

24、ent,while removing from our customers the responsibilities of application support,monitoring and availability.Extensible software,embedded inthesystems landscape.Alfa Systems has been designed to enable our customers to extend and embed functionality throughout their ecosystems,using modern technolo

25、gies and approaches.Flexible and configurable productstructures.Alfa Systems supports both retail and corporate business,including complex leases and loans,usage-based products and risk-free rates.Simplified countries and regions,allonone system.Multi-country and multi-jurisdiction features in Alfa

26、Systems cover all of the languages,currencies and accounting standards required by a complex,geographically dispersed business.Processes as workflows and businessrules.Alfa provides exceptional experience inconverting high-level processes into configured workflows and business rules,minimising manua

27、l intervention,reducing operating costs and enabling better customer service.Built for finance and accountingprofessionals.Alfa Systems is built with flexibility inmind,especially for those who face ahostof intricate business challenges andincreasing regulatory complexity.5Strategic reportCorporate

28、governanceFinancial statementsOther informationWhat Alfa does differentlyA compelling investment opportunityAlfa Systems is a leading auto and equipment finance software platform.Purpose-built for auto and equipment enterprises globally,developed tomeetthecurrentand future needs of the industry.Dive

29、rsificationAlfa continues to win customers,broadening across sectors and company size.Massive marketThe software market serving the asset finance industry is massive($3.4bn*)and relatively resilient.Global leasing potential addressable market is over$1.3tn*.Push and pull market driversMarket demands

30、 are driving the need for modern specialist software.Push factors include regulatory and cyber security concerns.Pull factors include digital,mobility and cost reduction opportunities.Barriers to entryMarket complexity and changing regulation create a significant barrier to entry to new software pro

31、viders.Market-leading softwareAlfa Systems is recognised as leading software inthe automotive and asset finance industry,with the best delivery record and people,but with only around 3%ofthe target market spend.Recurring revenuesEmbedded customer relationships drive strongrecurring revenues,augmente

32、d byAlfa Cloud.Exceptional IPStrong existing IP being continually enhanced with new IP including AlfaiQ.Cash-generative growthClear strategy,which can be self-funded,to deliver continued growth and dividends to shareholders(119m in dividends paid out from 2020 to 2023).*A Deloitte view of the assetf

33、inance software industry(2022)Alfa Financial Software Holdings PLC Annual Report and Accounts 20236Investment caseQ What are you most proud of in2023?A There are many to choose from but ifI had to sum it all up,it would be the performance of the Alfa people.We started the year with very high levels

34、ofinflation and,during the summer,we had the uncertainties that arose from two possible offers for the Company,but despite this,the Delivery teams achieved a record number of deliveries in the year,the Engineering teams have worked with Markets and Products to launch Alfa Systems 6 and wehave won so

35、me really prestigious new customers.On top of this,the Alfa culture hasshone through inthe activities in our communities and,in particular,the work initiated by the Environmental Impact team a few years ago culminated in our commitment to our net-zero journey.We therefore enter 2024 in really good s

36、hape tocontinue ourgrowth trajectory.Q How is the move toa subscription modelgoing?A It is only really in the last three years that we have moved to a Cloud First sales approach,and given the sales cycles in enterprise software,it can take time for the impact to filter through,butwe are now seeing t

37、angible financialevidence of our success here.Subscription revenues were up 16%in 2023 driven by very strong sales of Alfa Cloud and growing licence revenues.TCV grew even more strongly,up 28%,and this shows the strength this will bring to our business inthe future.Q How will Artificial Intelligence

38、(AI)impactAlfa?A We see that AI can provide significant benefits to help customers workflow and decision makingas well as for enhanced testing,and to potentially improve the help function within the system,and these are the areas that we willbe investigating.We dont however see ithaving a significan

39、t impact on how we or others will develop asset finance software,as alot of the skill in developing good systems comes from understanding the issues and thinking ofways it can be tackled,with the pure coding element being a relatively small piece.Q What excites you mostabout 2024?A I am really looki

40、ng forward to starting work with the new customers wehave recently won and seeing what Alfa Systems 6 will bring to these and ourexisting customers.We have never lost acustomer who implemented v5 since itwas launched in 2010 and so we knowthe benefits we can bring to our customers and that these rel

41、ationships will lastmany years.Critical to this is asuccessful start to these projects,bothwith new and existing customers,working closely with themin a true spiritof partnership,delivering new functionality to support their business objectives.So 2024 will not only provide exciting and challenging

42、opportunities for Alfa people but will provide a great platform for many years to come.“Our strategy is to continue to develop our software,to ensure that we meet and exceed customer andmarket needs as they evolve and as the regulatory and commercial environment continues to change.We believe we hav

43、e the industry-leading software and we continue to invest to maintain thatlead.”7Strategic reportCorporate governanceFinancial statementsOther informationCEO Q&A“Overall we expect 2024 revenue growth to be mid to high single digits driven by continuing strong growth in subscription.Our confidence in

44、 the outlook and our strategy means that we to continue to invest in the business ahead of the expected growth.”Andrew Denton,CEOStrong performanceIn 2023,we remained focused on continuing to drive the business forward,delivering growth and at the same time making strong strategic progress towards a

45、 subscription-based business.One of our differentiators is the quality of our delivery record,and in the year we saw a record ofseven go-live events and a total of 35 delivery events.We have also continued to develop and enhance our software and the launch of Alfa Systems 6 in Q4 2023,the sixth majo

46、r version of our software,has been enthusiastically received by customers and sees ten new modules available for customers to implement.Financial performance was strong with revenue up 9%to 102.0m(2022:93.3m)with particularly strong growth in subscription revenues,up 16%.Operating profit was 30.1m(2

47、022:29.6m)after the costs of investing into people as we build for future growth.Cash conversion was extremely strong at 115%(2023:102%)with a high level of receipts just before year end and we finished the period with net cash of 21.8m(31 Dec 2022:18.7m).We expect this very strong position to parti

48、ally unwind in 2024,with the long-term average trend being c100%.We have had a very strong pipeline for some time now,and it was very pleasing that we converted two prospects into wins before the end of the year with Total Contract Value(“TCV”)growing 16%to 165m(2022:143m)at 31 December 2023.This in

49、crease in TCV has been drivenby 28%growth in our subscription revenues showing how the transition to a subscription model is underpinning future revenues.The two recent wins are for major customers with multi-phase rollouts and these along with prospects we expect to convert in the late-stage pipeli

50、ne will provide revenues for the business for years to come.We had 19 customers(2022:17)contributing revenues of more than 2m in the year,up from just seven in 2019.Wehave significantly reduced our customer concentration,with our top five customers now representing 35%of our revenues in 2023,compare

51、d with 61%in 2019.Our largest customer now represents less than 10%of our revenues for the first time in over 8 years.As expected,following very strong recruitment for the previous two years and as a result of our improved and very high retention rate of 97%(2022:90%),we deliberately slowed recruitm

52、ent in 2023.This was to ensure the quality of the experience for new joiners as we consolidate experience levels within theteam as a whole.Headcount at Alfa Financial Software Holdings PLC Annual Report and Accounts 20238CEO review 31 December 2023 was up 8%at 475(2022:441).Average headcount in the

53、period of 463(2022:420)was a 10%increase on last year.The Company received two approaches from Private Equity houses in the summer.Neither approach led to a formal offer,and the business continued to focus on delivering against its objectives.Net-zero commitmentOur Environmental Impact community was

54、 created six years ago and in 2023 a major milestone was achieved with the company committing to a net-zero target.We performed a detailed analysis of our emissions,including calculating the emissions from our supply chain,supported by some external specialists,following which we decided to align ou

55、r ambitions with those of the Science Based Target initiative(SBTi).We submitted our targets to SBTi and had them validated.We have formally committed to reducing our Scope 1 and Scope 2 emissions by 42%by 2030,along with a commitment toachieve net-zero by 2050,which entails at least a 90%reduction

56、in emissions withthe remainder offset by carbon removal credits.Strategic progressAlfa is a leading asset finance software company with global scale.Our software platform,Alfa Systems,is the worlds leading asset finance software,and has been supporting some of the worlds largest and most innovative

57、companies for more than 30 years.Our vision is to grow our Company and grow our impact faster than headcount,always retaining our underlying culture.Key to achieving this is delivering more concurrent Alfa implementations,more efficiently with our world-class Alfa Systems product.We will have a big

58、company impact,but a small company feel.Our strategic priorities are to:Strengthen Sell Scale SimplifyWe have continued to make good progress in all these areas in 2023,but there are three areas where we have made particularly strong progress:Growth in subscription revenues Launch of Alfa Systems 6

59、Improvement of the Alfa DevelopmentModelAll three areas are covered in more detailbelow.Subscription Strong growth in subscription revenues and TCVAlfa has been on a journey transitioning from the on-premise perpetual licence environment to a subscription-based Cloud model.In 2017 we started to offe

60、r Alfa Cloud,a hosted solution and in 2020 won our first Alfa Start customer,which has the benefit of the speed of implementation of a pre-configured system hosted in Alfa Cloud paid for on a subscription basis.The demand from all customers for a subscription-based Alfa Cloud solution,incorporating

61、the automated monitoring,patching,scheduling and security features,has increased since then with all of the wins in 2023 being subscription-based Alfa Cloud solutions.Looking forwards 90%of our late-stage pipeline are looking to adopt Alfa Cloud and all new customers are looking for a subscription-b

62、ased pricing model.We are seeing the strongest growth in our revenues from the Subscription revenue stream and expect this to continue as momentum builds.We have a single-tenant SaaS solution.Weand our customers benefit from a single standard code-set and database,but with multi-layer data segregati

63、on as opposed to code-based segregation used in multi-tenant SaaS models.One of the big benefits of this approach is that customers can control their release cycles rather than having a timetable dictated to them.We mitigate the extra cost from this approach by encouraging customers to share branche

64、s and release dates.Our hosted services are ISO 27001 and ISO 27018 certified and SOC1 and SOC2 audited to confirm compliance with controls around data security and availability.Given the mission-critical nature of our systems to our customers,having such third-party verification of our compliance w

65、ith these standards is a key selling point.Subscription revenues grew strongly in the period,up 16%,with TCV increasing 28%.The growth in revenues was particularly strong from Alfa Cloud supplemented by a growing licence base.All customers upgrading from v4 to v5 have moved to Alfa Cloud.We have 13

66、customers using Alfa Cloud for their live production environments and have another 3 customers taking hosting services during the design and implementation phase.Maintenance revenues also grew strongly with the benefit of price rises and also from the net increase in live customers.Software Exciting

67、 roadmap ofdevelopment Software revenue for the year was down 4%on 2022.Following a very strong first half of customer funded development days,in the second half,we saw a reduction as attention moved towards investment for the launch of Alfa Systems 6.Our strategy is to continue to develop our softw

68、are,to ensure that we meet and exceed customer and market needs as they evolve and as the regulatory and commercial environment continues to change.We believe we have the industry leading software and we continue to invest to increase that lead,through a 9Strategic reportCorporate governanceFinancia

69、l statementsOther informationbalance of customer funded development and self-funded development.Despite having what we believe is the industrys leading software,we continue to look for ways to improve our software and also the way we develop the software.During 2023,we ran a project to refine our Al

70、fa Development Model.This has resulted in a number of actions being taken,including reorganising the structure of the Engineering teams to align under product areas,and reviewing the way we communicate and collaborate to improve the workflow through the development process.We are already seeing the

71、benefits of this with improved speed and quality of development.We release an upgrade every four weeks and periodically we release a new version of Alfa Systems which highlights the stepchange functional and technical advancement that has been made since the last version.During 2023,we made progress

72、 in several valuable and eye-catching new areas,such as Alfa Compose and Environmental Accounting,which are headline items for our next major version.Alfa Systems 6 is the sixth major release since Alfa was formed 33 years ago.Announced in the autumn of 2023,Alfa Systems 6 is a functional upgrade,gi

73、ving customers access to ten additional modules,and is being released through the usual four-week upgrade cycle over anumber of months,so can be implemented like any other upgrade andwill be frictionless for customers.Services High quality serviceswith a record sevengo-live eventsOverall services re

74、venue was up 10%on 2022,with strong chargeability during the first half but with lower chargeability in the second half due to the successful delivery of a number of go-lives.We continue to implement a number of v4 to v5 upgrades,and these accounted for 17%(2022:14%)of total services revenue.Other w

75、ork for existing customers accounted for 50%(2022:52%)of our services revenue,with the balance of 33%(2022:34%)from new implementations.There were sixteen new implementations and v5 upgrades during 2023,with seven of these having go-live events in the year.We have a number of large customer projects

76、 that we expect to start up during H1 2024.We had seven go-live events in the year:two UK Alfa Start projects,three automotive finance projects across three continents and two v4 to v5 upgrades inthe UK for equipment finance.In addition,we had an existing customer golive in a new country,Mexico,alth

77、ough one customer exited a small market resulting in the total number of countries where we are live remaining at 37.We also went live with our first African commercial asset finance portfolio,just over two years after we went live with the customers retail portfolio.Increasing our use of partners i

78、s a key element of our longer-term strategy for increasing the number of implementations we can deliver and providing us with a more flexible implementation resource.Our programme is well developed in Europe and now we have two partners in the US supporting us on two different client projects.At the

79、 moment,partners augment our existing resources on projects,but very much work under our direction.We continue to work towards setting up the training,processes and tooling that would allow partners to lead on implementations.For the first time,we have enabled a partner team member to work on an Alf

80、a Start implementation.Artificial Intelligence2023 has seen a rapid growth in interest in how AI may change the ways companies work,with a particular focus on Generative AI use cases.Alfa has been a leader on AI for many years:both directly supporting our customers digitalisation journeys with AI-ba

81、sed Know Your Customer(KYC)and Anti-Money Laundering(AML)checks and through ourAlfa iQ joint venture.We set up Alfa iQ over three years ago as a joint venture with Bitfount to explore the opportunities in the auto and equipment finance markets.Given the success of our work in Alfa iQ on credit decis

82、ioning,delinquency prediction and business process analytics,we have now consolidated its activities into Alfa and ended the joint venture relationship.As AI increasingly becomes a key focus ofthe customer journey,we believe the advantages of integrating the thinking andexpertise into Alfa outweigh

83、the advantages of keeping it as a separate standalone entity.We will continue to buildon the strong base of products andmodelling techniques that we have developed in Alfa iQ,and also leverage thetighter integration into the core Alfa Systems product.Strong engagement withourpeopleWe have continued

84、to ensure timely and clear communications with our employees,which was particularly important during 2023 where there were two possible offers for the Company.We are delighted to see that our retention rates have improved and now sit at 97%.We are focusing on enhancing our training programmes both f

85、or technical development and to develop our leaders of the future.We have settled into a post-COVID working pattern,making the most of in-person events to maintain our culture,whilst also being thoughtful on our travel and the emissions footprint that this generates.We continue to assess the ways we

86、 work to ensure that they work for both the individual and for the team as a whole.Capital returnWe remain a strongly cash-generative business,with cash conversion of 115%in Alfa Financial Software Holdings PLC Annual Report and Accounts 202310CEO review continued2023 being the fourth year in a row

87、in excess of 100%.We continue to generate more cash than we need for our growth plans and continue to return excess cash to shareholders.Our main mechanism for returning capital is the payment of a regular dividend,and our policy is to grow this progressively.In the year we paid an ordinary dividend

88、 of 1.2 pence or 3.5m.We have also made one-off returns of capital through special dividends.In the year,we paid special dividends of 5.5p per share or 16.2m.This took total special dividend payments over the last three years to 37.0 pence or 109m.In addition to the dividend payments,we announced in

89、 January 2022 an 18 month share buy-back programme which came to an end on 30 June 2023.In 2023,we purchased 1.9m shares at a cost of 3.1m.This took total purchases since the programme started to 4.8m shares at cost of 7.7m.All of the purchased shares are currently held in Treasury.Having executed t

90、his share buyback programme,we currently believe the quickest and simplest mechanism for returning cash toshareholders is via special dividends,but we will keep under review whether another share buy-back program should be launched.Even after paying dividends of 19.7m and share purchases of 4.8m,we

91、finished the year with a strong balance sheet with net cash of 21.8m.As a consequence,the Board is proposing a final dividend of 1.3 pence per share,8%up on last year(2022:1.2 pence per share),with an ex-dividend date of 30 May 2024,a record date of 31 May 2024 and a payment date of 27 June 2024.In

92、addition,the Board has decided to declare a special dividend of 2.0 pence per share,with an ex-dividend date of 2 May 2024,a record date of 3 May 2024 and a payment date of 30 May 2024.The special dividend would amount to a total payment of 5.9m.Steady market conditionsThe macro outlook remains unce

93、rtain at the moment,although the recent high levels of inflation have eased and interest rates may have peaked.Alfa Systems is operational in 37 countries;in automotive finance,equipment finance and wholesale and loan finance;for OEMs,banks and independents and across all asset classes.The breadth a

94、nd diversity of Alfas business interests help to insulate us fromeconomic uncertainty in individual geographies and sectors of our business.Along with Alfas diverse revenue sources providing insulation against the current economic uncertainty,the market itself provides protection.The asset finance m

95、arket is a more secure form of lending and it has a history of gaining market share in uncertain times compared with non-asset backed lending markets.In addition,the need for software is not associated with new business alone,large players in our market will have significant extant portfolios to man

96、age whether they are writing new business or not,and these portfolios will be subject to the same drivers of technical change as growing businesses.Regulatory change,digitalisation and the growing need for flexibility continue to drive customers to review their systems,particularly those still runni

97、ng on legacy platforms,and they will continue to select more flexible modern systems.We believe that the asset finance software market will remain robust.We continue tosee new opportunities entering into oursales pipeline which supports this.With our functional,flexible,modern,cloud-native system,we

98、 continue to be well positioned to capitalise on that end marketdemand.Strong pipelineWe are pleased to have converted two prospects in the late-stage pipeline in recent months with up to four more expected to convert in the near future.Intotal,we have 11 prospects in the late stage,ten of which are

99、 at preferred supplier status and five where we are already performing paid work under letters of engagements on implementations as we finalise commercial contracts.We also continue to see new prospects coming into the early-stage pipeline,showing that the buying dynamics of the market remain unchan

100、ged.It was also pleasing to see the speed at which wewon an Alfa Start project and completed the implementation,all within the calendar year.Overall,we remain confident in both the demand for our software and our ability to win work in the market.OutlookThe asset and automotive finance markets have

101、continued to remain strong through 2023 despite broader macro uncertainty with demand for software remaining robust.Alfa continues to see software projects proceed,new sales close and newopportunities enter our pipeline.We expect 2024 revenue growth to be mid to high single digits driven by continui

102、ng strong growth in subscription.Within thisperformance,we anticipate a greater weighting in the second half of the year asnew sales come fully on stream.Ourencouraging new business pipeline,confidence in the outlook and our strategy means that Alfa will continue toinvest in our technology and peopl

103、e,whilst continuing to return cash to shareholders through our sustainable,progressive dividend.Andrew DentonChief Executive Officer13 March 202411Strategic reportCorporate governanceFinancial statementsOther informationEuropeSustainability requirementsEuropean environmental regulations andrequireme

104、nts are promoting a faster market shift than in other parts of the world.Upcoming regulations as part of the Corporate Sustainability Reporting Directive(CSRD)and the need to increase the proportion of electric vehicles(EVs),while balancing this with high outright cost and high interest rates,have n

105、ecessitated a shift in the business model of the original equipment manufacturers(OEMs).Finance companies and their vendors are being asked to support wider use cases to enable affordability of EV assets and extend their lifecycle.Alfa has been investing in several areas to support these sustainabil

106、ity initiatives.This includes working with stakeholders across our customer base on creating arobust Scope 3 emissions reporting tooland investing in functionality to allowa shift to more active asset lifecycle management and usage-based products.Digital Operational Resilience ActAnother area of foc

107、us is the regulation coming from the Digital Operational Resilience Act(DORA),which financial services firms need to bein full compliance with by Q4 2024.These requirements apply to all critical systems of financial services companies and theimpacts of this on information security are being analysed

108、.While the Act could lead to enhanced requirements,Alfa already has strong information security procedures and policies.In fact,DORA could benefit Alfa by increasing barriers to market entry for smaller technology vendors.Consumer Duty RegulationsThe UK market has been affected by theConsumer Duty r

109、egulations which became active in mid 2023.Whilst Alfa has not had to make significant software changes to support this,the indirect effects are being seen as some players move out of the consumer markets(benefiting our customers whose market share increases).Others need to focus on efficiency and c

110、ost cutting to adjust to the higher levels of risk and associated costs which drives them to consider new systems.Basel 3.1(capital requirements standards in relation to risks)implementation in 2024 could add to the regulatory burden and cost of lending to consumers and small and medium-sized enterp

111、rises(SMEs).OverviewLife is never boring within asset finance as the industry needs to keep changing to keep pace with the needs of its customers.Changing regulations and rising interest rates,alongside the fear of recession and increasing delinquencies,have been push factors for change.On the flip

112、side,the need to support new business models,enabling more flexible usage of assets over their lifecycle and incorporating additional add-on services and fees,plus the need to maintain a stronger relationship with the end customer,have been key drivers for innovation.Alfa continues to listen closely

113、 to our clients and engage with the market tobetter understand what we can do to help them achieve their strategic goals.We have continued to be headline sponsors of some major industry events,where we have spoken as part of expert panel discussions,and we have taken an active part in industry assoc

114、iation committees in order to understand and drive forward the agenda for change.2023 has been focused on designing and enhancing the product for the launch of Alfa Systems 6,which will deliver solutions to meet the learnings and requirements gained from these ongoing interactions with the asset fin

115、ance market participants and especially our valued clients.Alfa Financial Software Holdings PLC Annual Report and Accounts 202312Market overviewTechnologyAI and machine learningOne of the prominent trends in 2023 has been the rapid growth of interest in AI and machine learning-based functionality.AI

116、 and machine learning have been around for many years and are used in a variety ofexisting processes within the asset finance industry from fraud detection and cyber security to credit decisioning support.There is a wish to further develop the usage of these models to improve process efficiency and

117、improve the success of delinquency and collections processes.Alfa has taken the decision to incorporate Alfa iQ into the core Alfa Systems product as machine learning becomes an expected capability for a software platform.The specialist team will work alongside those with asset finance specific know

118、ledge to integrate functionality into Alfa Systems.Generative AI and the usage of large language models(LLMs)is an emerging area of interest for the asset finance industry.Pilot use cases are emerging within automated testing or utilising retrieval augmented generation(RAG)techniques to improve the

119、user experience when accessing knowledge bases.However,data governance and uncertain regulation mean that there is low uptake of this technology for business processes.There are paths forward:these use cases can be delivered using privately deployed foundational LLMs with commercial usage rights fro

120、m cloud providers.Innovation atAlfa is driving forward internal pilots utilising this approach,building functionality which could be extended in2024 to client-facing products.Flexible ecosystemsThe increasing trend of flexible APIs with easy(and no-code)integration allows operators to build a flexib

121、le ecosystem and take advantage of new fintech technologies at different stages of their processes.This allows Alfa to concentrate on its core functionality and create partnerships and defined interfaces withbest-in-breed software providers ofspecialist services.This strategy will continue into 2024

122、 with the aim of organically growing a network of add-on features provided by partner providers.Australia and New ZealandSustainability initiativesElectric vehicles(EV)incentives passed by the Australian Government in November 2022 made it more beneficial for commercial finance companies to offer no

123、vated leasing for EVs.This led to a triple fold increase in EV uptake in the first half of 2023,with novated leasing through commercial finance companies(fleets)accounting for 80%of EVs financed.Other initiatives such as AFIAs Sustainable Finance Taxonomy and the National Reconstruction Fund(for ren

124、ewable and low emission investments)are driving the way forward towards net-zero.As mentioned previously,Alfa has been investing in several areas to support sustainability initiatives and announced new functionality in 2023 to help its customers track and report their portfolios Scope 3 greenhouse g

125、as(GHG)emissions.Economic environmentAustralia,alongside the rest of the world,is suffering from uncertainty,highinflation and interest rates.This hasledtoa challenging environment for commercial real estate,leading to banks and finance companies diversifying into asset finance,increasing competitio

126、n anddampening the effect of the cut in government tax incentives for the sector.As part of Alfa Systems 6,Alfafurther improves efficiency of processes,through the launch of Compose and enhancements to CaseManagement functionality.AmericaChanging US regulationsThe US market drivers vary by sector an

127、dsize of organisation.Larger banking clients are focused on proposed changes to capital requirements,which accentuate the needto reduce operating costs,increase efficiency and scale operations.Equipment finance companies have been concerned about regulatory change from Dodd-Frank section 1071 mandat

128、ing additional data capture and reporting requirements from credit applications.Anationwide injunction to this in October has allowed the industry to focus on other things for the time being,although itmay emerge again as a risk at the end of2024.The launch ofAlfa Compose at the end of 2023,whichall

129、ows clients to create highly personalised screens for specific case processes and users,has gained much traction as a tool to increase efficiency and allow clients to scale.Economic environmentThe global environment of rising interest rates and increasing costs has also had animpact in the US market

130、,with finance providers needing to find additional sources of income as well as reduced costs through operational efficiency.To extract additional revenue,this includes incorporating extra fees or add-on services and subscriptions to the financecontracts.The need for data to drive customer insights,

131、increase revenue opportunities including add-on sales,and drive performance has led to an increased desire for finance providers to have moreopportunities for direct customer interaction.Nevertheless,indirect sales through dealerships and dealer portals still continue to play an important role and,f

132、or this channel,speed and price are the main drivers of success.To facilitate this trend,Alfa continues to invest in scaling the performance and use of Alfa Systems.Priority investments for 2024 are to complete the enhancement to allow full 24/7 operations and to enhance performance of key processes

133、 including the integration into US dealer portals for bulk origination processes.13Strategic reportCorporate governanceFinancial statementsOther informationRevenueSoftwareSubscriptionsServicesGrowth provides career development and rewards for our people and partnersRetain cash for future needs and i

134、nnovationCashValue creation and deliveryAlfa softwareLeading-edge technology making our customers future-readyPeopleSmart and diverse people strengthen our market-leading positionDeliveryExcellent delivery track record strengthens our market positionExceptional IPOur resourcesPartnershipsPartnership

135、s are an important growth accelerator,bringing a number of benefits to Alfa and ourcustomers.EmployeesWith more than 450 employees worldwide,our people are our greatest asset,developing organically from graduate to seniors.Financial strengthStrong balance sheet driven by organic growth at good margi

136、ns withdisciplined capital allocation drives excellent cash generation.InnovationOur innovative software leads theindustry in functional scope,performance and user experience.Read more about our market overview on pages 16-17Alfa Financial Software Holdings PLC Annual Report and Accounts 202314Busin

137、ess modelOur delivery track record and market-leading software drive recommendations and additional salesExisting clientsAddressable marketNew addressable marketAdjacent marketsStrengthening our market positionExpanding our addressable marketNew markets and geographies require software developmentCo

138、mpanies require innovation and customer-specific enhancementsOur growthOur exceptional IP drives our growthValue creationEmployeesAlfa has Investors in People gold accreditation and other awards.Contribution to SDGs ShareholdersStrong cash generation and 119m ofdividends since 2020.Contribution to S

139、DGs Suppliers and partnersWe have grown our partner ecosystem,agreeing engagement terms with a notable global professional services organisation forthe combined marketing and delivery of the Alfa Systems platform.Contribution to SDGs ClientsSimple deployment models enable ustodeliver Alfa Systems mo

140、re efficiently and earlier.Contribution to SDGs Communities and environmentIn 2023,we raised over 50,000 forcharities.Contribution to SDGs Read more,including about the SDGs,in the ESG section on page 5515Strategic reportCorporate governanceFinancial statementsOther informationEverything we do suppo

141、rts our growth and strategy.Our strategy for creating long-term,sustainable business value is:StrengthenGrow our differentiation ofmarket-leading People,Product and Delivery,by:Investing in our smart,diverse team;Investing in ourproduct;Investing in our delivery methodology and tooling;Exploring acq

142、uisitions and joint ventures.Read more on pages 17-19SimplifyEnable more concurrent Alfa Systems implementations,more efficiently,by:Simplifying our product;Simplifying our implementations;Simplifying our processes across our organisation;Expanding our AlfaStartoffering.Read more on pages 24-25SellE

143、nable profitable growth byfocusing on:Alfa Systems on AlfaCloud;Subscription revenue;Incremental sales;Commitment to our chosen target markets.Read more on pages 20-21ScaleIncrease our capacity for developing and delivering Alfa Systems,by:Developing our smart,diverse team;Leveraging global talent s

144、ources to enhance our competitive position;Growing our partner ecosystem;Expanding our addressable market.Read more on pages 22-23Alfa Financial Software Holdings PLC Annual Report and Accounts 202316Strategy in actionHighlightsThis year,we have delivered some significant Learning&Development projec

145、ts,including the enhancement of training tools and opportunities through new libraries of content(featuring hundreds of self-serve learning courses such as technical demos,techniques for asking for help,writing skills and project management)and easy-to-access programmes,made graduate programme impro

146、vements and end-of-placement process changes,as well as embedding our leadership development offering.Our focus on career progression centred on launching a new hub of content for colleagues entire talent journey,and clear explanation of how to own their career,as well as how to have great developme

147、nt conversations.Employee engagement remains strong,with our Pulse survey garnering consistently strong results over the year.Our popular company events and social talks gave us all a chance to connect andlearn.Event highlights included our annual regional conferences,which were enjoyed in Brighton(

148、UK),Byron Bay(Australia)and Charlotte,North Carolina(US)in 2023.2023 saw the introduction of benefits-focused communications,helping colleagues get the most out of the many things we offer.When it comes to Inclusion&Diversity,welaunched our first diversity,equity,and inclusion(DEI)survey in 2023,and

149、 have delved into gender pay gap findings,action planning and having positive conversations around all facets of diversity at Alfa.We were proud to win Corp!magazines diversity award in the US this year.We were delighted to have been recognised,for the second year running,in Newsweeks Most Loved Wor

150、kplaces UK,2023,and were ranked number 11 inthe top 100.We were also crowned winners of the Social Award at the Asset Finance Connect Summer Awards 2023.PlansNext year,well maintain our focus on making Alfa a great place to work,improving diversity and inclusion with various initiatives and targets,

151、and keep up the things that make our Alfa culture so special.We have a rich calendar of company events for the year ahead,including an EMEA company conference taking place in Amsterdam.We look forward to developing our people with even more learning offerings and programmes.Well update our DEI pledg

152、es,continue to partner with greatorganisations and encourage ourAlfa Communities to keep up their important efforts,with central support andguidance.#11In Newsweeks MostLoved Workplaces UK,2023Mentoring opportunitiesWe have had a real focus on mentoring in2023,both internally and externally.Wehave p

153、rioritised getting our Womens community mentoring scheme up and running to support professional development and help with narrowing thegender gap in leadership.Our partnership with upReach,which helps students from lower income backgrounds access top graduate jobs,continued in 2023.We provided mento

154、rs,held Insight Days and ran the Alfa Work Experience programme with upReach candidates.We were delighted to support TheWomens Associations Executive Challenge,which gives girls aged 15-19 insight and connection into the world of work.We provided mentors,meetings and experience days and we have comm

155、itted to do the same again in 2024.17Strategic reportCorporate governanceFinancial statementsOther informationStrengthen|PeopleHighlightsIn 2023,we designed and progressed development of the next version of AlfaSystems software,Alfa Systems 6,delivered in a series of six releases.The ultimate goal i

156、s to strengthen the Alfa product offering to enable it to meet the developing business needs of our clients and the wider market.This allows us not only to continue to offer the premier platform for our core market but increase our addressable market.Alfa Systems 6 has enabled us to focus on what Al

157、fa Systems needs to be and focus investment initiatives in key areas.One ofthe areas we have been investing in is enabling the business models focused around EVs and enabling finance companies to manage contracts for thesenew assets,which could necessitatedifferent assets and services.Incorporating

158、AI into Alfa Systems We have grown our expertise and gained a strong position in AI,so now is the right time to bring all forms of AI,including generative and predictive AI,into our main product strategy at Alfa.Product initiatives will be encouraged to utilise ourAlfa iQ experience to allow clients

159、 tobenefit from greater automation ofprocesses while ensuring that Alfa upholds its strong guiding principles andAI values.Any AI solution will ensure ethical standards are maintained by ensuring explainability of decisions.Alfa Innovation processes have been usedto allow a wider participation in de

160、veloping use cases and building our experience and knowledge in generative AI.Combining Alfa iQs leading edge R&D with Alfas track record for delivery has led to a robust,secure framework to be built out to allow some productionisation of uses within 2024.Plans2024 looks to be a very busy year for t

161、heAlfa Systems product.Alfa Systems 6 functional releases will be completed in Q4 2024,and will include multiple new features for users and allow continued extension of our addressable markets.These will include functionality for 24/7 support,asset lifecycle management,subscription services and auto

162、mation.Extending Alfa Systems 6 Total Capability will include investment in the Originations process.Multiple clients,globally,use AlfaSystems to support their contract originations;however,we are still more widely known as a servicing provider.In2024,we will be enabling our clients,worldwide,to ben

163、efit from best-in-class functionality through their direct and in-direct sales process.Additionally,we will be building upon our superior pricing and in-life management capabilities to support a wider range of financial products and services for our clients within the commercial loan space.10modules

164、 are part of AlfaSystems6launch Alfa Financial Software Holdings PLC Annual Report and Accounts 202318Strengthen|ProductHighlightsIn 2023,Alfa continued its trajectory of success,marked by several significant milestones as part of our future-facing approach.We demonstrated our commitment to deliveri

165、ng cutting-edge solutions as we achieved a record seven new customer go-lives across the globe.This expansion aligns with our dedication to bringing innovative asset finance technology to a broader global audience.We have delivered two new Alfa Start projects in 2023,allowing our clients to take adv

166、antage of Starts greatly reduced implementation times and quickly begin to realise the benefits that Alfas out-of-the-box solution can provide in just a matter of weeks.Alfa charted new territories by launching into Mexico with an existing global automotive manufacturer,as well as the first Alfa Sys

167、tems v5 client in the Asia Pacific region.We are looking to start a newproject in the Asia Pacific region witha global agricultural equipment manufacturer who is already live with AlfaSystems in two continents,thereby cementing our partnership with them.At the same time,our further product expansion

168、 in South Africa to cover commercial lending as well as retail underscores our adaptability and versatility within the financial technology sector,and broadens our market scope.Another achievement this year was themigration of over half a million stocking finance contracts to Alfa for aclient we hav

169、e been working with for many years.Not only are we forging stronger bonds within our long-standingrelationships,but our enhancedportfolio makes us a more competitive and attractive partner for new clients seeking best-in-class delivery.Alfa is making strides with numerous upgrade projects across all

170、 of our territories.We have recently completed an Alfa Systems v3 to v5 upgrade with onelong-standing client,and have severalother Alfa Systems v4 to v5 upgrades in progress.PlansAs we move forward,Alfa remains dedicated to breaking new ground,exceeding expectations,and shaping thefuture of asset fi

171、nance technology ona global scale.We look toward the opportunities and challenges that lie ahead,poised for continued success inanever evolving market.v5 of Alfa Systems is now live with27customersAlfa Start is live with BibbyFinancial Services“Were delighted to partner with Alfa to enhance the serv

172、ice we provide to clients.Alfa Start is widely regarded as the gold standard within the industry and,once fully embedded,the platform will reduce manual processing,allowing our teams to spend more time delivering value for our clients,brokers,vendors and business partners.”Sean Neville,Managing Dire

173、ctor at Bibby Asset Finance19Strategic reportCorporate governanceFinancial statementsOther informationStrengthen|DeliveryHighlightsThought leadership has remained a key focus for Alfa in 2023,with the completion of our five-part series covering Innovation in Implementation and the publication of blo

174、gs providing insight into the benefits of asset finance software in the automotive finance industry and how the transition to electric vehicles can provide a number of additional revenue opportunities.We continue to have a strong presence atkey industry events,including leading panel discussions and

175、 presenting insights in technology in the leasing industry,such as AI and robotics.We are also delighted that a member of our revenue team has been appointed onto the Equipment Leasing and Finance Association(ELFA)Emerging Talent Advisory Council(ETAC),ensuring we are well positioned to gain insight

176、 and provide influence within the US Equipment Finance industry.The sales pipeline has remained strong throughout 2023,with a significant number of prospects in the late-stage pipeline.With a focus on subscription andparticularly our Cloud First strategy,itis notable that more than 90%of the prospec

177、ts in the late-stage pipeline are opting for an Alfa Cloud deployment model.implementation.Alongside this,we have continued to roll out frequent patches to all components of the solution,including adatabase upgrade to the latest Aurora PostgreSQL versions,which will unlock anarray of new capabilitie

178、s including serverless databases and faster reads forreporting use cases.Alfa Cloud runs on AWS and can be scaled to meet the demands of our highest-volume customers.Alfa Systems is designed to be a cloud-native application that can automatically leverage available compute capacity to offer maximum

179、performance.During 2023,we ran a large-scale internal performance exercise to update benchmarks and demonstrate that the traditional performance and scalability concerns of fixed infrastructure on-premise installations arent limitations in our cloud-native SaaS solution,even forthe largest auto and

180、equipment finance portfolios.One of the highlights in 2023 was theofficial rebrand of Alfa Hosting to Alfa Cloud.On the surface,this might seem likea minor change,but for Alfa and our customers and prospects,it more clearly describes our offering as a Single Tenant Software-as-a-Service(SaaS)Product

181、.As part of that single product,we have continued to roll out new features which we make available to all of our customers including storage of backups in Microsoft Azure,cloud SaaS escrow,improved Recovery Time Objective(RTO)and Recovery Point Objective(RPO)for failure scenarios,Amazon SQS support,

182、and additional customer portal features to name a few.These new features were stress tested in our annual Disaster Recovery testing,which was the most extensive to date.We have seen six new customers enter live operation on Alfa Cloud,taking the total to 13,upgraded many others and onboarded three f

183、or the early stages of Alfa Financial Software Holdings PLC Annual Report and Accounts 202320Sell90%of new late-stage pipeline intending to use Alfa CloudAlfa Cloud securityToday,more than ever,core applications such as Alfa Systems are being deployed in public cloud environments and are increasingl

184、y providing internet-facing APIs to digital customer-facing platforms and applications.This level of openness significantly improves theexperience for end customers,and the opportunity forour customers,but,at the sametime,increases the workload for teams responsible for cybersecurity.When customers

185、select Alfa Cloud,they are able to delegate responsibility for security monitoring and response to the AlfaCloud team and our partners,such as Fortra Alert Logic.Our automated infrastructure-as-code approach to deployment means that every customer environment is deployed with the same layered and in

186、dependently verified security architecture,significantly reducing the chances of a vulnerability being exploited;and our single-tenant SaaS model reduces the blast radius of a theoretical attack,reducing the overall risk to both usand our customers.Using our central deployment platform,we areable to

187、 respond to potential issues by bulk applying security mitigations,such as path or IP blocks,and quickly rolling out software patches to our customersenvironments.Self-managed Alfa customers typically take significantly longer torespond to security incidents in their Alfa Systems environments.This i

188、s not unexpected and is usuallya result of overheads and handovers of code and information to multiple teams often distributed across different countries and timezones.Coordinating and delivering the response from withina single team results in fasterresolution and overall moresecure deployments.Pla

189、nsWith the groundwork laid in 2023,we are expecting to start to roll out the use of Aurora Serverless databases through 2024.This will bring additional processing capacity and throughput to our customers at peak times whilst helping to reduce thewasted compute when running provisioned databases of a

190、 fixed size.In preparation for the first tranche of ultra-high volume customers running inproduction on Alfa Cloud,were continuing to invest in our offering,bolstering our team capabilities and adding features for our growing customer base.This will ensure that we are always able to meet our custome

191、r needs around deployment and work scheduling.21Strategic reportCorporate governanceFinancial statementsOther informationHighlightsWe know our power is in our people atAlfa,and we want the best talent to workfor us.We attended numerous recruitment events throughout the year inthe UK and US,and hoste

192、d several Insight Days giving potential applicants the opportunity to experience Alfa prior toapplying for a role.These events contributed to more than 800 individuals applying to our next graduate programmes.We made 52 appointments throughout the year and ended 2023 with a total global headcount of

193、 475.We have continued our employer brandactivities with employee story campaigns,celebrating our people,andhave shared life at Alfa on our socialsallyear,giving insight into our workplaceand what we offer.Our recentlyupdated website features careerspages showcasing core benefits and what to expect

194、at Alfa,and now integrates with our recruitment platform for a seamless candidate experience.475total global headcount Our Leadership Development programmes are enabling colleagues tofurther develop and hone the key skills,traits and characteristics needed toeffectively lead others,helping us growac

195、ulture where individuals and teams thrive.Partnering with various organisations(such as Bright Network and UpReach)gives us great exposure to new audiences too.Insight Days at AlfaThis year we hosted four Insight Days at our office in London organised by HR and the Alfa for Racial Equity Community.T

196、he aim of these events is to attract top graduates to apply to Alfas graduate scheme,but also to give the students skills and knowledge they can add to their CVs while also helping us to increase the diversity of applicants.To do this,we include workshops focusing on two key areas of Alfa Engineerin

197、g and Implementation which are run by colleagues working in these career paths.We also include a networking lunch to give the attendees a chance to meet people at Alfa andan applications session to gothrough CVs,cover letters andAlfas application process.Find out more about these recruitment events

198、on pages 59-60.Plans2024 will be another busy year for the Peopleteams.High on the agenda willbecontinuing to execute our plans toimprove diversity,equity and inclusionacross the organisation.Well continue to partner with organisations that can help us access talent and boost our diversity,and we lo

199、ok forward to developing a new partnership with Niyo.Globalconnections will be improved with changes to our intranet giving regional views as well as global news updates for everyone.We will kick off a new Alfa Alumni programme to maintain relationships with valued colleagues and strengthen our empl

200、oyer brand.This will maintain connections with the extended Alfa network as well as support us in finding valuable referrals.Our ongoing Ways of Working review will also help usto continue offering a flexible and supportive workplace that will retain ourtalent as well as attract candidates from awid

201、er pool.Alfa Financial Software Holdings PLC Annual Report and Accounts 202322Scale|Our PeopleHighlightsThis year,we successfully leveraged our partner relationships,onboarding partner intakes in EMEA and the US,and embedding partners in even more Alfa project teams and client-side/Systems Integrato

202、r(SI)roles.This year saw a record number of partner-assisted project go-lives.We have also benefited from increased sales channel opportunities viaour partner relationships and the extended global reach they provide.We have grown our partner ecosystem by agreeing engagement terms with Teamwill US,st

203、rengthening our delivery capacity in North America.We have also partnered with a market leader in software quality and test automation with a proven track record supporting our customers.Wehave continued to explore new partnerships in strategic geographies thatcan help us in sales opportunities and

204、delivery.We have continued to invest in our partner programme,extending our partner support team and further developing ourpartner training this included course material improvements and implementing a digital credentials platform to formalise our SI partner training certification.Improved access to

205、 supporting information and tooling has brought increased efficiencies and opened up newroles for partners.Moreover,wehave started to execute our plan for moving to more advanced partner sales and delivery models,making good progress on the enabling investment.PlansIn 2024,we will continue to scale

206、our existing partnerships and evaluate otherpotential partners to further strengthen our partner ecosystem andmarket coverage.As staff augmentation partnerships mature and partner resources gain expertAlfa Systems implementation knowledge and experience,we will continue to advance them towards ajoin

207、tdelivery model.2024 will see significant investment inourpartner programme including:Opening up more roles for partners;Improving partner onboarding,including implementation of a LearningManagement System for managing training courses,scheduling,reference materials,testing,and integration with our

208、digital credentials platform for certification;Completing the programme of enablinginvestment for partner-led delivery of our Alfa Start product in ourhome market.We will continue collaborating on businessdevelopment activities with our partners.This is an important aspect of our partnerships,with n

209、ew sales acting as a growth accelerator,both for Alfa and for scaling our partner relationships further.10partner relationships5partner assisted project go-lives in 202312ongoing partner assisted projectsStrengthening our delivery capacity in North AmericaLooking to replicate the success ofour partn

210、ership and staff augmentation collaboration in EMEA,thisyear wepartnered with Teamwill US,strengthening our delivery capacity inNorthAmerica.“Delighted to share a major milestone in our journey!As Teamwill,we have been long-standing partners with Alfa Financial Software.We are excited to announce th

211、e expansion of our partnership into the US market with Teamwill USA,our new office in Dallas.Together,we will leverage our expertise in integration and consulting,as well as market insights in equipment finance and auto finance,to deliver unparalleled value to our US clients.Stay tuned as we embark

212、on this exciting journey of collaboration andinnovation!”Zied Bach Hamba,Managing Director at TeamwillUS23Strategic reportCorporate governanceFinancial statementsOther informationScale|PartnersHighlightsBuilding on our container deployment strategy,we have facilitated the transition for on-premise c

213、lients to use those containers and proven the value of these inthe fast-moving security environment,by proactively responding to newly announced industry vulnerabilities through our secure development pipelines.Our leading-edge software development lifecycle(SDLC)and tooling for large-scale code reo

214、rganisation have enabled us to keep moving with new versions of Java.This hasalso allowed us to simplify our cross-platform compatibility testing,resulting in a greater level of consistency and assurance.When it comes to delivery,we have created the ability to migrate back book portfolios via a spre

215、adsheet upload,including repeatable processes,fully documented cutover activity and out-of-the-box reconciliation reports.We are also utilising innovation and ideas from the experience we have within our Delivery workforce and will be investing insimplification ideas in theareas of testing,documenta

216、tion,processes and Alfa Cloud.PlansMigration is one of the most complex tasks within a project,and with that in mind,in 2024,we plan to continue to invest in this area,both from a product and tooling perspective.Capitalising on the personalised user experience,we will be building further market and

217、product use-case specific components and enable targeted editability and actions.Further access to runtime customisation options will also accelerate the trialling and adoption of new features or market functionality as part of a streamlined upgrade process.19clients on long-term support branchesEvo

218、lving Alfa Development ModelIn 2023,we set ourselves a challenge:we knew that we had the best software in the business but we also knew that the way we worked together to enhance that software could be even better.Weve grown significantly andsome of our software development processes have evolved or

219、ganically,rather than by design.We met this challenge by working to improve flow across our development model,ultimately aiming to improvethe flow of value toour customers.Flow is the speed and efficiency with which high-quality work moves through an organisation.We have thus made significant change

220、s to the structure of our Product Engineering group,making it much easier to work with,and have brought more clarity to the roles involved in changing our core product.Alfa Financial Software Holdings PLC Annual Report and Accounts 202324Simplify|Product,Implementation and ProcessesHighlightsExpansi

221、on and growth have been the themes of the year on Alfa Start,both interms of new markets as well as functional coverage in our existing Startproducts.In October,we announced the launch ofAlfa Start for US Equipment,the preconfigured software platform built forfinancial organisations in that market.B

222、uilt on Alfas extensive experience supporting the top providers of equipment finance in the US,Alfa Start delivers best-in-class business processes,required by operations of all sizes.This becomes our third Alfa Start accelerator,alongside US Automotive and UK Equipment,which enable rapid implementa

223、tion and early business valuefor our clients at entry level costs.On the automotive side,we have expanded our process catalogue by configuring and documenting new business processes in areas such as management of aftermarket products,securitisation,and increased handling forbankruptcy.In addition,we

224、 have partnered with the team developing Alfa Compose to define user perspectives for the retail automotive industry.This new feature will enable the configuration of amore targeted view into the system,tailored to simpler products and different user roles so that users can complete their work more

225、efficiently.Our latest out-of-the-box implementation has expanded the Alfa Start implementation methodology to facilitate a hybrid project team leveraging our strong partner network.Enabling our partner network toassist in the delivery of Alfa Start will provide the opportunity to commence projects

226、more reactively,further reducing the time between a sale being agreed and the client realising the business benefits of Alfa Systems live in production.PlansBuilding on our success in 2023,we expect 2024 to be another busy year aswe focus on expanding the out-of-the-box capabilities of Alfa Start ac

227、ross the contract lifecycle.We plan to leverage internal investment initiatives across Alfa to bring new capabilities into Alfa Start that will enable Alfa Start projects to deliver our tried and tested product evenmore efficiently.Building on our initiative to leverage trusted partner resources for

228、 Alfa Startprojects,we will look to continue tobuild on this model,continuing the mission to enable rapid and cost-effective Alfa implementations.Furthermore,we look to continue totransition some of the newest Alfa Systems functionality into the Alfa Startproduct offering.This is likely toinclude Al

229、fa One(an implementation simplification initiative)to remove unnecessary differentiation between AlfaSystems implementations,and AlfaCompose to bring process-specific information straight to end users fingertips in conjunction with Alfa workflow.Alfa Start implementations can reach live production i

230、n as little as22 weeksUS Equipment Alfa StartAlfa Start is now available for the USEquipment market.Designed toaccelerate systems change programmes,Alfa Starts process catalogue,pre-configuration and associated documentation acts as a project accelerator,enabling faster implementations,maximising va

231、lue and minimising risk.More than 40 back-office business processes have been configured across a standard product set,each supported by predefined workflows,business rules,document generation and user roles.Alfa Start is supported by a suite of documentation including industry-standard process maps

232、,and description documents for each business process and integration.Finance organisations choosing Alfa Start also benefit from an expedited methodology,which focuses on a quick,efficient implementation,and is backed by the Alfa Cloud hosting service,making application environments available on day

233、 one.25Strategic reportCorporate governanceFinancial statementsOther informationSimplify|Start20232022202147544138220232022202182%84%78%20232022202197%90%87%Definition and KPI calculationmethodIn considering the financial performance of the business,the Directors and management use key performance i

234、ndicators(KPIs),some of which are defined by IFRS and some of which arenot specifically defined by IFRS.We believe that operating free cash flowconversion is a key measure requiredto assess our financial performance.It is used bymanagement to measure liquidity.This measure is notdefined byIFRS.The m

235、ost directly comparable IFRS measure for operating free cash flow conversion is cash flows from operations.The measure is not necessarily comparable to similarly referenced measures used by other companies.Asaresult,investors should not consider this performance measure in isolation from,or as a sub

236、stitute analysis for,our results of operations as determined in accordance with IFRS.Alfa measures a range of financial and operational metricsto help manage business performance.OperationalHeadcountEmployee engagement(%)Retention rate(%)2023 performanceHeadcount has increased due to planned recruit

237、ment and a strong retention rate throughout 2023.Why do we measure this?Our revenue growth and ability to win new business is heavily dependent on the number and deep expertise of our people and thereforegrowing our team for the future iskeyto this goal.Linked to remuneration:NoLinks to strategic pr

238、iorities:1 3 2023 performanceEmployee engagement remains strong,boostedby our continued focus on internal communications and engagement,and supporting our communities to further their ESGinitiatives.Why do we measure this?Employee engagement measures levels of employee satisfaction and connection to

239、 thebusiness.There is a positive correlation between employee engagement and business performance and the metric should be a lead indicator for retention rate performance.Linked to remuneration:YesLinks to strategic priorities:1 3 2023 performanceOur employee retention rate has been very strong in 2

240、023,reflecting our continued investment in learning and development,and continued strong employee engagement scores.Retention in 2021 dipped in the immediate aftermath of the pandemic lockdown easing.Why do we measure this?Our deep expertise in the industry and our ability to service our customer re

241、lationships are driven by the quality of our people.A higher retention rate demonstrates sustained engagement and maintenance of key skills andknowledge.Linked to remuneration:YesLinks to strategic priorities:1 3 475 82%97%Hosting and subscription licence)assuming these services continued as planned

242、(actual contract length varies by customer);(ii)the estimated remaining time to complete Services and Software deliverables within contracted software implementations,and recognise deferred licence amounts(which may not all be under a signed statement ofwork);and(iii)Pre-implementation and ongoing S

243、ervices and Software work which is contracted under a statement of work.As TCV is a reflection of future revenues,forward looking exchange rates are used for the conversion into GBP.Constant currency:When the Company believes it would be helpful for understanding trends in its business,the Company p

244、rovides percentage increases or decreases in its revenues or operating profit to eliminate the effect of changes in currency values.When trend information is expressed herein“in constant currencies”,the comparative results are derived by re-calculating comparative non-GBP denominated revenues using

245、the average exchange rates of the comparable months in the current reporting period.Headcount:Represents the number ofAlfa employees under contracts of employment asat 31 December of eachyear.Retention rate:Represents the retention of Alfa employees over the previous 12-month period,excluding any ma

246、naged staff attrition.Employee engagement:The overall employee engagement score is derived from quarterly employee Pulse survey ratings based on the questions“I am happy in my role”and“I would recommend Alfa to a friend as an employer”.The figures shown are for the last survey of theyear.Operating f

247、ree cash flow conversion:Calculated as cash generated from operations,less capital expenditures,less the principal element of lease payments inrespect of IFRS16.Operating free cash flowconversion represents operating free cash flow generated as a proportion of operatingprofit.Total contract value(“T

248、CV”):TCV is calculated by analysing future contract revenue based on the following components:(i)an assumption of three years of Subscription payments(including maintenance,Cloud Our strategic priorities1Strengthen3 Scale2 Sell4 SimplifyAlfa Financial Software Holdings PLC Annual Report and Accounts

249、 202326Key Performance Indicators 202320222021102.0m93.3m83.2m20232022202121.8m18.7m23.1m20232022202130.1m29.6m24.7m202320222021115%102%114%20232022202129.6%31.8%29.7%202320222021165.3m142.9m133.1mFinancialGroup revenue(m)Cash(m)Operating profit(m)Operating free cash flowconversion(%)Operating profi

250、t margin(%)Total contract value(m)2023 performanceGroup revenue grew by 9%(also 9%on constant currency basis),with particularly strong growth in our subscription stream driven by growth insubscription-based customers as well as a number of perpetual customers moving into post go-live support.Service

251、s revenue grew by10%reflecting growth in our delivery capabilities,while Software is slightly down as a result ofourtransition to a subscription model.Why do we measure this?Growing revenue is a measure of customer and business success.It is central to our objective of growing by maintaining our lea

252、ding competitive position through differentiation of People,Product and Delivery.Linked to remuneration:YesLinks to strategic priorities:1 2 3 42023 performanceCash generated from operations remained strong in 2023 with over 100%cash conversion,allowing for the payment of further special dividends t

253、otalling 16.6m.Why do we measure this?Cash is critical to allow the Group to cover itsexpenses,provide funds for investment,growthand to meet its long-term needs.Cashgeneration is a good indicator of the underlying health of the business.Linked to remuneration:YesLinks to strategic priorities:1 2 3

254、42023 performanceOperating profit increased from last year as a result of growth in revenues,partially offset by increased salary,hosting and internal computer costs.The margin was lower this year due to favourable items in the prior year.Why do we measure this?Operating profit is an indicator of th

255、e Groups profitability.It can be used to analyse the Groups core operational performance without the costs of capital structure and tax expenses impacting profit.Linked to remuneration:YesLinks to strategic priorities:1 2 3 42023 performanceOperating free cash flow conversion for 2023 was very stron

256、g,due to favourable billings and early collections in the final months of the year.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-generative and this KPI allows us to monitor cash flows before investm

257、ent in capital projects.The calculation of the KPI is included on page 30.Linked to remuneration:YesLinks to strategic priorities:1 2 3 42023 performanceOperating profit margin declined following somefavourable items in 2022 including a one-off gain on lease assignment and favourable foreign exchang

258、e.Why do we measure this?Operating profit margin is a measure of how effectively we sell Alfa Systems and manage ourcost base.It also allows comparison acrossdifferent companies and sectors.Linked to remuneration:YesLinks to strategic priorities:1 2 3 42023 performanceTotal TCV has seen strong growt

259、h since 31 December 2022,driven by our subscription stream,with two new customers being fully contracted in Q4.This is offset by a drop in software TCV as a result of our transition fromperpetual to subscription licences,andservices is slightly down due to some newAlfa implementations,including one

260、of thecustomers contracted in Q4,completing during2023.See page 29 for further detail.Why do we measure this?Helps to predict revenue and the value of a contract over its lifetime,which will generally extend beyond the current financial year.Seepage 29 for a detailed explanation of thecalculation.Li

261、nked to remuneration:NoLinks to strategic priorities:1 2 3 4 102m 22m 30m 115%30%165m 27Strategic reportCorporate governanceFinancial statementsOther information“We saw another strong cash performance with 115%cash conversion supporting 24.5m of cash returns to shareholders.”Duncan Magrath,Chief Fin

262、ancial OfficerFinancial results20232022Movement%Revenue102.093.39%Gross profit63.759.96%Operating profit30.129.62%Profit beforetax29.628.92%Taxation(6.1)(4.4)39%Profit for theperiod23.524.5(4)%Basic EPS7.99p8.24p(3)%Diluted EPS7.90p8.09p(2)%Alfa Financial Software Holdings PLC Annual Report and Acco

263、unts 202328Financial reviewRevenues increased by 9%or 8.7m to102.0m in the 12 months ended 31 December 2023(2022:93.3m).Growth at constant currency was also 9%see page 26 for the definition.Gross profit increased 6%to 63.7m(2022:59.9m)slightly behind the increase in revenue mainly due to increased h

264、eadcount and salary inflation,with operating profit increasing by 2%or 0.5m to 30.1m(2022:29.6m)with profit before tax of 29.6m(2022:28.9m).The Effective Tax Rate(ETR)for 2023 is 20.6%(2022:15.2%)which increased over 2022 largely due to the increase in the UK Corporation Tax rate.The resulting profi

265、t for the period was 23.5m(2022:24.5m).Revenue by type m20232022Movement%Subscription 31.827.416%Software15.616.3(4)%Services54.649.610%Total revenue102.093.39%Subscription revenues Overall subscription revenues increased strongly by 16%to 31.8m(2022:27.4m),with growth across all three elements of l

266、icence,maintenance and hosting driven from both existing and new customers.Allnew customers in the late-stage pipeline are looking for a subscription licence contract,with 90%looking to utilise Alfa Cloud.Software revenuesSoftware revenues of 15.6m were down(0.7)m or 4%on last year(2022:16.3m),due t

267、o a reduction in the recognition of customised licences from perpetual licence customers,as we focus on moving customers to a subscription model.Development work for existing customers was heavily weighted towards the first half of the year,but overall was in line with 2022.There were one-off licenc

268、e revenues of 0.5m(2022:0.4m).Services revenues Total services revenues increased by 10%to 54.6m(2022:49.6m)at actual exchange rates.Growth was broadly spread and came from both implementation revenues for new customers and also from existing customers,either going through v4 to v5 upgrades(which ac

269、counted for 17%of total services work versus 14%last year)or ongoing services work.Total contract value(TCV)TCV by stream m20232022Movement%Subscription119.593.328%Software17.820.1(11)%Services28.029.5(5)%Total TCV165.3142.916%Total contract value(TCV)increased over last year by 16%to 165.3m,signifi

270、cantly boosted by two large contracts signed in the year offset by the completion of one large project.Subscription TCV has increased 28%,driven by strong growth inboth hosting and licence subscriptions.There was a 11%decrease in Software TCV,principally from a reduction in the as yet unrecognised c

271、ustomised licence as we transition to subscription licences.Services TCV of 28.0m was down 5%versus this time last year due to a lower level of activity in advance of new contracts being signed and started.TCV by stream for next 12months m20232022Movement%Subscription 37.130.123%Software8.710.2(15)%

272、Services21.224.7(14)%Total TCV67.065.03%Of the TCV at 31 December 2023,67.0m(31 Dec 2022:65.0m)is anticipated to convert into revenue within the next 12 months.Within this subscription TCV isup strongly by 23%to 37.1m(2022:30.1m)on the back of two new contracts,software TCV of 8.7m(2022:10.2m)is dow

273、n 15%due to the reduction in unrecognised customised licence,with services TCV down 14%to 21.2m(2022:24.7m).We expect this toincrease as new contracts start.Operating profitThe Groups operating profit increased by0.5m,or 2%,to 30.1m in 2023(2022:29.6m)primarily reflecting the netbenefit of increasin

274、g revenues net of operating costs.Headcount numbers were up 8%at 31 December 2023 at 475(2022:441),with average headcount of 463 up 10%on last year(2022:420).Staff retention rate was very strong through 2023 and was at 97%at 31 December 2023(2022:90%).29Strategic reportCorporate governanceFinancial

275、statementsOther informationExpenses netm20232022Movement%Cost of sales38.333.415%Sales,general and admin expenses*34.032.16%Other income,FX and one-off costs*(0.4)(1.8)(78%)Total expenses net71.963.713%*FX gains and losses and fair value movement on FX forward contracts as well as the one-off aborte

276、d transaction costs have been removed from SG&A to better show underlying costs,and have been shown together with other income in the table above.Cost of sales increased by 4.9m to 38.3m(2022:33.4m)to support thegrowth in the business.This was dueto higher headcount,in both our implementation and en

277、gineering teams along with pay increases.Hosting costs increased from the strong growth in AlfaCloud.Sales,general and administrative(SG&A)costs increased to 34.0m in the year(2022:32.1m).Salary costs were up 12%in the period to 46.8m(2022:41.8m)due to higher headcount and pay increases.Profit Share

278、 Pay,including employers costs,in the period was 3.8m(2022:3.5m).Share-based payment charges have decreased over last year at 1.6m(2022:1.8m),principally due to lower provision for NI costs from a lower share price at year end.Other costs increased 11%to 15.6m(2022:14.0m)with cost patterns returning

279、 to normal along with the impact of inflation.Other income,FX and one-off costs decreased by 78%since 2022.Included within this is 0.5m(2022:nil)of income related to the Research&Development expenditure credit(“RDEC”)scheme which we qualified for in 2023 for the first time,with reduction in sub-lett

280、ing income in FY 23 due to be office space being assigned in 2022.Legal&other costs related to possible offers for the company were 0.6m(2022:nil).There was a net gain of 0.3m(2022:1.1m)from FX gains and losses and fair value movement on FX forward contracts.We have continued to invest in our produc

281、t,with total investment increasing in 2023 to 35.0m(2022:29.1m).This investment is calculated based on the total time spent by people in our Product Engineering team working on Alfa Systems product either for specific customer developments,which are largely chargeable,or internal investment and enha

282、ncement of the product.It does not include time spent on implementing or maintaining and supporting systems for customers.It includes salary costs and a full overhead allocation,and includes amounts shown as R&D expense and costs that have been capitalised.Profit before taxNet finance costs reduced

283、to 0.2m(2022:0.6m)benefiting from a full year of reduced lease costs and interest income of 0.3m(2022:nil).Overall Profit before Tax of 29.6m was up 2%onlast year(2022:28.9m).Profit for the periodProfit after taxation decreased by 1.0m,or 4%,to 23.5m(2022:24.5m).The Effective Tax Rate(ETR)for the ye

284、ar increased to 20.6%(2022:15.2%)as aresult of the increase in the UK corporation tax rate,net of the benefit from prior year credits of 1.2m principally due to the last year of operating under the R&D tax credit scheme.For the full year 2024,we expect the ETR to be around 26%due to the full year ef

285、fect of the increase in the UK Corporation Tax rate to 25%along with the loss of the R&D tax credit which has been replaced by RDEC scheme,which is shown in other income and not within the tax charge.Earnings per shareBasic earnings per share decreased by 3%to 7.99 pence(2022:8.24 pence)on the incre

286、ased tax charge.Diluted earnings pershare decreased by 2%to 7.90 pence(2022:8.09 pence).Cash flowCash generated from operations was verystrong at 39.2m in the period(2022:34.0m)up 5.2m on last year.Netcash generated from operating activities was also very strong at 32.2m(2022:27.2m)with tax payments

287、 of 6.5m up on the 6.2m for 2022.Net cash(including the effect of exchange rate changes)increased by 3.1m to 21.8m at 31 December 2023.In the year the 2022 final dividend and two special dividends were paid,totalling 19.7m(2022:22.5m).In addition,the purchase of own shares was 4.8m(2022:5.6m)for bot

288、h the share buy-back,which endedin June 2023,and to fund the Employee Benefit Trust(EBT).Net capitalexpenditure of 3.4m was up onlast year(2022:2.3m)with increased capitalisation of software,as expected,upto 2.8m(2022:1.5m)and with other capex of 0.6m(2022:0.8m)principally due to investment in IT eq

289、uipment.Operating free cash flow conversionm20232022Cash generated from operations39.234.0Adjusted for:Capital expenditure(3.4)(2.3)Principal element of thelease payments inrespect of IFRS 16(1.3)(1.6)Operating free cash flow34.530.1Operating profit30.129.6Operating free cash flowconversion115%102%A

290、lfa Financial Software Holdings PLC Annual Report and Accounts 202330Financial review continuedThe Groups Operating Free Cash Flow Conversion(FCF)of 115%(2022:102%)was very strong,benefiting from extremely prompt payment by customers at year end.As noted before,over time the ongoing trend for 12 mon

291、th cash conversion will be around 100%as we move to a subscription model.Balance sheetThe significant movements in the Groups balance sheet,aside from the cash balance which is described above,from 31 December 2022 to 31 December 2023 are detailed below.Other intangible assets have increased by2.1m

292、to 5.0m(2022:2.9m)due to additions to capitalised development costs.Right of Use Assets and total Lease Liabilities have decreased by 1.0m and 1.1m respectively due to depreciation charges and lease payments made in theyear.Trade receivables reduced by 3.3m to5.6m at 31 December 2023(31 December 202

293、2:8.9m)with very strong cash collection at year end.Accrued income reduced to 4.6m(31 December 2022:6.5m)due to promptbilling.Corporation tax receivable has increased to 1.9m(2022:0.2m)due to tax payments made during the year and theimpact of the R&D tax claims.Trade and other payables balance incre

294、ased by 0.5m to 10.0m at 31 December 2023(31 December 2022:9.5m).Contract liabilities reduced slightly by 0.6m to 14.2m at 31 December 2023(31 December 2022:14.8m)due to a small reduction in the deferred licence balances.Capital allocation anddistributionsThe Group has had very strong cash generatio

295、n over a number of years and weexpect to continue to be cash-generative going forwards.The Groups capital allocation policy takes into consideration the need to continue to invest in our people and technology whilst maintaining strong liquidity.We wish to retain a degree of optionality for future in

296、vestment which we can assess at thetime.Over the three years since November 2020,ordinary dividends of 9.8m and special dividends of 109.4m for a total of119.2m have been paid.In addition,we purchased 4.8 million shares at a cost of 7.7m through the share buy-back programme which finished in June 20

297、23.Therefore,over the last three years,therehas been a return of over 125m toshareholders.The Board intends to progressively increase the ordinary dividend as the Group grows,whilst ensuring that we retain a strong balance sheet.For 2023,we are proposing an ordinary dividend of 1.3 pence per share,a

298、mounting to 3.8m,with an ex-dividend date of 30 May 2024.In addition,we have declared a special dividend of 2.0 pence per share,amounting to 5.9m with an ex-dividend date of 2 May 2024.Going concernThe financial statements are prepared onthe going concern basis.The Group continues to be cash generat

299、ive and the Directors believe that the Group has a resilient business model.The Group meetsits day-to-day working capital requirements through its cash reserves generated from operating activities.TheGroups forecasts and projections,taking account of reasonably possible changes intrading performance

300、,show thatthe Group has sufficient cash reserves to continue to operate for a period of not less than 12 months from the date of approval of these financial statements.Thegoing concern assessment also includes downside stress testing in line with FRC guidance which demonstrates that even in the most

301、 extreme downside conditions considered reasonably possible,given the existing level of cash held,the Group would continue to be ableto meet its obligations as they fall due,without the need for substantive mitigating actions.Onthis basis,the Directors consider it appropriate to continue to adopt th

302、e going concern basis of accounting in preparing the financial statements.Subsequent events and Related partiesThere are no subsequent events that require disclosure.Details about related party transactions are disclosed in note32.Viability statementThe viability statement containing a broader asses

303、sment by the Board of the Companys ongoing viability is set out in the Strategic report on pages 45 to 47.Duncan Magrath Chief Financial Officer13 March 202431Strategic reportCorporate governanceFinancial statementsOther informationAlfas effective risk management provides a foundation forthe safe pu

304、rsuit of our strategic goals,innovation andopportunities.Introduction2023 has seen our risk environment evolve,and our monitoring and mitigation has kept in step with this evolution,guided by our well-established risk management framework.Careful management of risks has helped to ensure that our ope

305、rations and strategy have continued to prove their resilience towards external themes,such as the continuing global economic uncertainty,high interest rates and cost of living,and their potential impacts on the asset finance industry which we serve.Our principal risks,each categorised as external or

306、 internal,are explained on pages 36 to 44.We have an established governance regime in place for risk management(seepage 33),which puts assessment,monitoring and controlling of risks at theheart of our strategy.On behalf of theBoard,and with oversight by the Auditand Risk Committee,the Risk Managemen

307、t function has focused in 2023 on identifying,understanding,monitoring and controlling risks,as well as providing direction on the level of risk that Alfa is willing to take to achieve our strategic goals.Alfa puts considerable focus on our responsibility towards society and the environment,and we s

308、eek to make a positive impact across a broad range of ESG topics.As such it is vital that ESG-related risks are included in our risk management activities.We consider how topics such as climate change will impact our industry,but also consider our responsibilities and the sustainability ofour activi

309、ties.Whilst we do not have any ESG-related principal risks,there is discussion of our ESG risk assessment onpage 55.Our Risk Management Framework how we identify and manage risksOur risk management framework is designed to be flexible and proactive,and links tightly into our operations,strategy and

310、decision-making.This allows us to react with speed and agility to new and evolving risks as they arise,across all of our business areas.This has helped us in 2023 to continue to progress our strategic objectives,and to identify and pursue opportunities as they arose.We recognise that managing risk e

311、ffectively is integral to executing our strategy.We have therefore implemented a five-step process 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 bu

312、t,instead,identified,assessed and managed inatimely manner.Alfa Financial Software Holdings PLC Annual Report and Accounts 202332Risk managementIdentifyrisksAssess and quantifyDefine riskappetiteRespond,manageand mitigateMonitor and review12345Whilst overall responsibility for risk lies at the Board

313、 level,the Directors have delegated authority for risk identification to the Company Leadership Team(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 RiskOfficer,twice a year.Each identified risk is categ

314、orised into one or more business areas,and is assigned to the most appropriate business owner.Risks are assessed to understand the likelihood and the impact of the risk crystallising.We assess risk across all of our business areas,and we consider theirlevel of impact to our organisation across these

315、 categories:Financial Reputational ESG Operational Legal and regulatoryThe assessed risks are then reviewed by the CLT and the Audit and Risk Committee,to provide assurance over completeness and quality of the risk register.Our systems and processes are designed to manage our exposure to risk rather

316、 than eliminate the risk completely.Therefore the Audit and Risk Committee,with the CLT,will reassess the Groups risk appetite each year with this in mind.The Audit and Risk Committee will consider the risks associated with the conduct of our business and the delivery of our strategy,assessing the r

317、isks we are exposed to and evaluating whether this exposure is acceptable given the likelihood and severity of the risk.Each risk is reviewed at least annually,bi-annually for the higher priority risks.At each review date,the existing controls are reviewed for adequacy and effectiveness.Due to the e

318、ver-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.If this is the case,then the business owner is responsible for implementing changes.Management monitors progress against the prin

319、cipal risks.This is shared with our internal auditor,BDO,to assist with forming the internal audit plan.The Board reviews 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.Our risk management fra

320、mework33Strategic reportCorporate governanceFinancial statementsOther informationTop downGovernance,identification and assessment of risk by senior managementBottom upIdentification,assessment,control and monitoring ofrisk by business areasGovernance and responsibilitiesOur organisation has an open

321、and accountable culture,led by our experienced CLT,whose members havemany years of experience in their areas.The Board and the CLT set the tonefor our risk management activities,embedding risk consideration and assessment into the culture within theorganisation.Ownership and accountability for risks

322、 is an integral part of our risk management framework.The Board has overall responsibility for the governance of risks,ensuring we have adequate and effective systems in place and setting the tone for our risk culture.Itdoes this in various ways:Risks are considered by the Board asanintrinsic part o

323、f our strategic planning,and in the consideration ofnew opportunities risk is recognised as aninherent part of eachopportunity,and is assessed together with the opportunity.There is a twice-yearly review by the Audit and Risk Committee of principal risks,their evolution,and consideration of emerging

324、 risks.The CLT members,or their delegates,are the owners for each risk in the Corporate Risk Register,and they,andtheir teams,are responsible for theidentification,assessment and treatment of the risks in their own areas.Risk management is thus embedded into each area of the business,as they are bes

325、t placed to progress the actions and mitigations.The Risk Officer coordinates risk management activities and collates the risks into the Corporate Risk Register.The Risk Officer is an advocate for best practice across the organisation.Risk assurance is achieved through our external and internal audi

326、ts as well as through our attainment of ISO27001 and ISO27018 certifications,and through our SOC1 and SOC2 audits.ResponsibilitiesBoard Defines the risk governance framework,risk culture andprinciples Sets the tone for risk management including risk appetite Responsible for an effective system of in

327、ternal controls Approves risk decisions that are beyond delegated authoritiesAudit and Risk CommitteeCEO and CLT Reviews the risk management framework and the effectiveness of internal controls,risk management systems and major risk initiatives Reviews and challenges the principalrisks in the risk r

328、egister,andrisk ratings Reviews and challenges the riskappetite Reviews the internal audit programme and reports Review the risk management framework and the effectiveness of internal controls,risk management systems and major risk initiatives across the Group Review the risk profile against risk ap

329、petite and make recommendations to Board in relation to risk profile,strategy and key controls Review and challenge the risk register and risk scores Review the sustainability of risk methodologies,metrics and policies Assess major risk-related projects Assess new commercial arrangements through par

330、ticipation in the DealCommitteeRisk Officer and CFOOperational management Responsible for collating updates,managing the risk register and presenting principal risks and uncertainties to the CLT and Audit andRisk Committee The Risk Officer acts as an advocate for risk management across all levels of

331、 the business The Risk Officer reports to the CFO in relation to risk management matters The CFO has responsibility for governance and risk management review Assesses for new risks,updates oncurrent risks assessment and implements mitigation strategies andactionsAll employees Be alert to risks assoc

332、iated withthe activities that they perform,and report such tooperational management.Report inefficient,unnecessary or unworkable controlsAlfa Financial Software Holdings PLC Annual Report and Accounts 202334Risk management continuedOur risk appetiteOur risk appetite provides us with guidance on the

333、levels of risk we are prepared to take in pursuit of our objectives,and is considered a fundamental part of the planning and execution of our strategy.Our risk appetite is assessed across the following categories:strategic,financial,legal,operational and ESG.Each of these areas has different considerations,and it is important that we are setting the correct tone for decision making in each area.Th