Alfa Financial Software (LON:ALFA) reported what management repeatedly described as an “excellent” and “very strong” 2025 full-year performance, driven by growth in subscription revenues and continued delivery momentum. Executives also outlined investments to expand the company’s addressable market, discussed a pragmatic approach to artificial intelligence (AI), and announced both ordinary and special dividends reflecting confidence in future prospects.
2025 results highlighted by subscription growth and improved retention
Management said subscription revenue rose 16% in 2025, alongside 18% growth in subscription total contract value (TCV). Annual recurring revenue (ARR) was GBP 43.9 million, up 15% year-over-year, and net revenue retention (NRR) was 109%, improving from 103% in 2024. Subscription revenue represented 34% of the company’s overall revenue mix.
CFO Duncan Magrath said revenue increased 15% at actual rates (17% at constant currency) “with growth across all revenue streams,” while gross margin was “nearly 64%.” He added operating profit grew 17% at actual rates, delivering an operating margin of 31.6%, and noted a 120 basis point benefit from FX hedges put in place against sterling-US dollar movements. The effective tax rate was 24.9%, in line with the prior year, and diluted EPS was 10.14 pence, up 18%.
Dividend increases and capital allocation stance
Management announced an ordinary dividend of GBP 0.015 per share and a special dividend of GBP 0.031 per share, for a total of GBP 0.046 per share, which the CFO said was up 21% versus the prior year’s proposed and declared dividends at the same point. Including a special dividend of GBP 0.050 paid earlier in the year, total dividends for 2025 were GBP 0.096 per share, up 20% year-over-year.
On capital allocation, Magrath said Alfa is “highly cash generative” and has a track record of returning excess cash. He stated cumulative dividends paid in the last five years totaled GBP 167 million, with overall dividend yield from ordinary and special dividends running between approximately 3.5% and 5% per year. Management said there were “no immediate investment requirements” for excess cash, supporting the decision to return funds to shareholders.
The company ended the year with a cash balance of GBP 26.4 million, following a net cash inflow of GBP 5.9 million. Dividends paid increased GBP 3.9 million year-over-year to GBP 26.0 million.
TCV trends, revenue mix expectations, and FX headwinds
TCV finished 2025 at GBP 227.5 million, up 3% from GBP 221.3 million in 2024. Magrath said the increase was driven by strong growth in subscription TCV, which more than offset reductions in software engineering and delivery TCV. Next twelve months TCV rose 2%, again supported by subscription TCV growth; delivery TCV was in line with the prior year, while software engineering TCV was down 35% year-over-year.
Software engineering revenue rose 13% in 2025, but the CFO cautioned that demand for chargeable enhancements from new customers appeared lower heading into 2026, contributing to the decline in software engineering TCV. He also noted margins are “quite sensitive” to the amount of chargeable enhancement work, given a relatively fixed cost base.
When asked about the future revenue mix, Magrath said subscription revenue is the fastest growing stream and that its share should increase in 2026. He said management would expect subscription revenue to rise toward about 40% of revenue, delivery to remain around 50%, and software engineering to fall to roughly 10%.
Foreign exchange was also a major discussion point. Magrath reiterated the company’s sensitivity assumptions, stating that each 1-cent movement in the US dollar impacts revenue by GBP 500,000 and operating profit by GBP 300,000. Using an illustrative move from an average $1.32 in 2025 to $1.35 in 2026, he said reported revenue would be GBP 1.5 million lower and reported profit GBP 0.9 million lower. He added that hedge gains of GBP 1.5 million in 2025 mean profit in 2026 could be GBP 2.4 million lower year-over-year “purely because of FX,” with hedging potentially creating an additional headwind depending on the actual exchange rate.
Product roadmap and AI: pragmatic use cases and new architecture investment
COO Matthew White emphasized Alfa’s strategy to “strengthen, sell, scale, and simplify,” centered on three differentiators: product, delivery, and people. A major focus of his remarks was AI, which he framed as an enabler of efficiency and customer value. White said Alfa’s AI strategy is grounded in “real use cases” and organized around four areas:
- AI literacy across the organization
- Internal efficiencies, including software development productivity
- Delivery acceleration to reduce implementation costs and timelines
- Product enhancements embedded within Alfa Systems
White cited “AskThea,” an AI chatbot used by delivery teams, customers, and partners. He said the company plans in 2026 to invest in architecture that simplifies customers’ secure and resilient use of AI with Alfa Systems, including AI capabilities both within Alfa Systems and as part of broader enterprise technology landscapes. He also referenced planned investment in “demonstrable and productionized functionality,” including multifunction self-service agents and intelligent document processing to automate credit workflow.
In response to questions about customer demand for AI, White said customers mainly ask for “features” and that whether a feature is delivered using AI is “mainly irrelevant” to them, though some customers want AI capabilities they can demonstrate internally. He also noted progress in models and ongoing work toward enabling more natural language interaction for configuring decisioning and workflow, dependent on the evolution of AI models.
White also argued that AI is unlikely to commoditize the company’s market position, pointing to the complexity and regulatory demands of asset finance software and the need for deterministic workflow, audit trails, and predictable ledger transactions. He added that Alfa’s pricing model—based on the number of asset finance contracts managed rather than per user—helps mitigate the risk of AI-driven headcount reductions at customers affecting Alfa’s revenue.
Pipeline, delivery execution, and market expansion initiatives
Management reported continued sales momentum. The late-stage pipeline ended the year with 10 prospects, up from eight at the prior year-end. During 2025, Alfa added five new late-stage prospects, converted one into a win, had one move back to mid-stage, and lost one. The CEO said the company is doing paid work with five of the 10 prospects and is “preferred supplier” with eight, which he said supports optimism about conversion.
On delivery, management said 20 customers are live on Alfa Systems 6, highlighting what executives characterized as a frictionless upgrade for existing customers. The CFO said there were 11 projects underway where the customer was not yet live; these implementations do not contribute to subscription revenues until go-live. He added that despite next twelve months delivery TCV being flat year-over-year, management expects delivery revenue growth in 2026, in part because Alfa is performing paid work for several late-stage pipeline customers.
White said 2025 was a “landmark year” for product expansion, with minimum sellable products (MSPs) developed in three key expansion markets:
- US Auto Originations, described as a major opportunity alongside existing US lease and loan servicing implementations; White said Alfa has sold the origination solution to one large customer.
- Fleet, aimed at opening the European auto finance market where fleet management often sits alongside retail finance; White said Alfa has secured an initial sale and the implementation is progressing.
- Commercial Finance, described as an adjacent market that increases total addressable market over time; White said Alfa secured two sales within customers primarily focused on asset finance and will step up marketing in 2026.
On workforce and operating footprint, management said average headcount rose 6% to 516 with staff retention of 97% and engagement of 83%. White said the company opened a new “Smart Hub” in Gdańsk following the success of its Lisbon hub, and plans to establish a 24/7 hosting operations team in Gdańsk in 2026.
Looking ahead, executives said demand for asset and automotive finance software remains robust and reiterated expectations for continued growth and momentum in 2026, while noting that software engineering revenues are expected to decline from 2025 levels due to customer mix and lower anticipated demand for chargeable enhancements.
About Alfa Financial Software (LON:ALFA)
Alfa has been delivering leading-edge technology to the global asset finance and leasing industry since 1990. Our specialised expertise enables us to deliver the most challenging systems transformation projects successfully.
Alfa Systems, our class-leading SaaS platform, is at the heart of the world’s largest and most progressive asset finance operations. Supporting all types of automotive, equipment and wholesale finance, Alfa Systems is proven at volume and across borders, and trusted by leading brands to manage complex portfolios, drive efficiency and sustainability, and enhance the customer experience.
With full functionality for originations, servicing and collections, Alfa Systems is live in 37 countries, representing an integrated point solution, a rapid off-the-shelf implementation, or an end-to-end platform for the complex global enterprise.
