Alfa Financial Software Stock

Hello, everyone, and welcome to Alfa Financial Software's 2026 Half Year Results Presentation. As always, I'm joined by Matthew White, Alfa's COO; and in his final results performance before retirement, Duncan Magrath, Alfa's CFO. And for the first time by Andrew Dickson, Alfa's incoming CFO. Duncan will take you through the financial review. Matt will cover operational delivery, and I'll return later to talk about the business, our sales progress and our outlook before we summarize and open for questions.

So stepping back and looking at the first half as a whole, we are pleased with the progress we've made. Subscription revenue grew by 14%, subscription total contract value by 22%. ARR grew by 17%, and net revenue retention remained strong at 110%. Subscription revenues now account for 37% of total revenue, which reflects the continued evolution of Alfa towards a larger recurring revenue business. Sales activity has also remained encouraging. We secured 2 wins during the first half, and total contract value increased by 17% to GBP 247 million. And we continue to see good activity across both the late-stage and early-stage pipelines. We are already working with 3 of the 9 prospects in our late-stage pipeline, which gives us confidence in our future opportunities.

We have continued to invest in our product and delivery capability. During the period, we invested GBP 19.6 million in software, particularly in originations fleet commercial finance and our AI capabilities. We also achieved 2 go-lives during the half, which is an important validation of both our product and delivery approach. Looking ahead, we remain confident in our full year expectations. We see artificial intelligence as an exciting opportunity to enhance our product, accelerate development and simplify delivery while continuing to create value for our customers.

Turning to the key financial highlights. Revenue was GBP 65.1 million, representing growth of 5% at constant currency. Total contract value increased 17% to GBP 247 million, and ARR increased 17% to GBP 48.5 million. Subscription revenue grew 14%, while net revenue retention remained very strong at 110%. Operating profit was GBP 18.4 million, and operating margin was 28%. Excluding the impact of severance costs and FX hedges, operating profit was ahead of last year by 2%. And with operating margin only slightly down on last year. Duncan will cover this later.

Cash conversion for the first half was 76%. That was influenced by the timing of customer receipts between the second half of last year and the first half of this year. Duncan will discuss that also in more detail shortly. Overall, these results reflect continued growth in our subscription business. ongoing investment in the product and good momentum across both the sales pipeline and delivery organization.

Before handing over to Duncan for the financial review, as usual, I would like to welcome Andrew Dickson who recently joined us as CFO, and who will formally succeed Duncan on the Board on the 16th of September. Andrew, perhaps you'd like to introduce yourself.

Thank you very much. Since joining Alfa a couple of months ago, I've got to know people both in EMEA and the U.S. I've been hugely encouraged by what I've seen and I'm really looking forward to taking over from Duncan when he steps down the board in a couple of weeks' time.

Thanks, Andrew. The first half of 2026 was a solid financial performance against last year, which was always going to be a tough comparator. Revenue was up 4% at actual rates or 5% at constant currency with growth in subscription and delivery revenues, partially offset by a lower level of software engineering revenue than the very strong first half of 2025.

The gross margin percentage was down 400 basis points. Two things to note here. Firstly, last year, we had a very high level of chargeable software engineering revenues. And secondly, the margin in this period is weighed down by severance costs. Operating profit was down 15%, delivering an operating margin of 28.3%, although very much impacted by severance costs and FX hedges. Excluding these, operating profit was actually ahead by 2% with the operating margin only slightly down on last year. The effective tax rate of 26.1% was in line with 2025.

Turning now to the cost lines in a little more detail. Cost sales was up 16% and SG&A up 12%, but both lines are distorted by the severance costs and FX hedges. In the first half, we incurred GBP 1.6 million of severance costs, including the associated legal fees, and this was split GBP 1.2 million into cost of sales and GBP 0.4 million into SG&A. In relation to FX, we had a GBP 1.7 million gain on the U.S. dollar hedges in 2025 compared with GBP 0.3 million loss on the hedges in 2026. So the year-on-year swing on that line alone is GBP 2.0 million.

Strip both of these out and the picture is much more measured. Cost of sales increased 10% and SG&A was up just 2%. Within SG&A, profit share is down GBP 0.5 million or 19% simply reflecting lower profits with share-based payments also being down. Depreciation and amortization was as expected, up GBP 0.6 million or 39% and I'll come back to the trajectory of amortization under modeling guidance. Other operating costs were up 6%, driven by the growth in head count and the cost of expanding into new markets and territories.

Turning now to TCV. Total TCV grew 17% to GBP 247 million, up from GBP 211 million this time last year. Looking at the revenue streams, subscription TCV and delivery TCV were both up 22%, with software engineering down 29%. Software engineering reduction reflects a lower level of chargeable development work needed for new customers as the profile of new customers changes, so will TCV. Next 12 months TCV was up 12% to GBP 101 million from GBP 90 million last year, again, with growth in subscription and delivery, partially offset by the reduction in software engineering. As I flagged up last year, we now supplement the TCV disclosure with ARR and NRR and I will turn to these next.

Annual recurring revenue was up 17% at 30th of June 2026 to GBP 48.5 million from GBP 41.6 million. As a reminder, we calculate this by taking the average subscription revenues over the last 6 months and annualizing them. And we exclude any revenues, which we do not expect to last 12 months at the point of origin. That 17% growth is very much in line with the underlying growth in subscription revenues. Net revenue retention was 110%. To help understand this, I've included a breakdown in the table.

We are, in effect, a 0 churn business for Modern Alfa systems, and so I've started the table at base of 100%. We then have a 3% drag from 1 specific terminating V4 customer who gave notice back in 2018 and not yet fully transitioned away from Alfa. We grew 6% from net upsell across the existing customer base and grew 7% from customers not yet live. It is the impact of new customers not yet live that I will return to in a minute because I'm not sure that this future growth is sufficiently understood by everyone.

So looking now at overall subscription revenues. Subscription revenues were up 14% on last year to GBP 24.1 million. Looking at the breakdown, 73% came from customers already live on V5 or Alfa System 6, 20% from new customers currently implementing ASV, 4% from customers upgrading from V4 and the remaining 3% from V4 customers who've not yet upgraded. Subscription TCV was up 22% on last year driven by growth from both new customer wins and the existing customer base which underpins our confidence that this revenue stream will continue to grow strongly.

We now have 44 customers contributing to subscription revenues, up from 41. Within that, Alfa Cloud customers on V5 or AS6 have increased from 23 to 24, with a further 3 in the late-stage pipeline, up from 1 last year. We have 15 customers on private cloud and 2 remaining V4 customers. As I said before, we do not expect to convert every private cloud customer, but we would expect to convert many of these over time. and that remains a potential incremental source of growth for the next few years.

Staying with subscription, I want to dive a bit more into the growth from customers not yet live on Alfa. I've shown this slide before, it shows the history of our V5 and AS6 customer base, and I've previously used it to make the point that there has been 0 competitive churn. I'm showing it again but wanted you to focus on the customers and implementation at the top. We currently have 15 customers in implementation, of which 2 are V4 upgrades. So there are 13 new customers who will drive future subscription growth once they go live and reach their full run rate revenues. All the customers in implementation started from 2023 onwards.

I'll show on the next slide how the customers in implementation, who we started work with in 2023, 2024 and 2025 will strongly contribute to the future growth in subscription revenues. Many of you will be familiar with the illustrative graph I produced a few years ago, showing the typical life cycle of a contract. I have shown a small copy of this at the top of this slide, as a reminder, and repeated the full slide in the appendix. This time, rather than using illustrative figures, I will be demonstrating with actual and internal forecast data.

The previous slide showed all V5 customers and was organized by when we started working with them. I have taken the 2023, 2024 and 2025 cohorts and excluded any of those, which are customers upgrading from V4, so only including new customers. The 2023 cohort is deep orange with 5 customers in it. The 2024 cohort is medium orange with 6 customers in it, and the 2025 cohort is the light orange with 2 customers in it. It shows revenue by half years with actual data from H1 2023 to and including H1 2026. It then shows internal forecast data for the period after that. You can see how the revenues build as customers move through implementation to go live.

It is important to note that this only shows revenue from customers we started working with in those years, and so it is not total subscription revenues. It is intended to show how the new customers and implementation are a significant contributor to overall growth in subscription revenues. The overall percentage rate growth rates will be lower than this once you add existing live customers into the figures. You can see that the growth in revenues from the 2023 cohort starts to flatten off in 2027 and 2028 as those customers reach go live and hit their full run rate.

If you compare the revenue for these 3 cohorts in 2026 to 2028, you will see that the revenue more than doubled over that period. These are revenues from customers we are working with today and there is no contribution here from customers we are not yet working with. We can be pretty certain and unless the project stop this growth will come through into our subscription renews. There is some risk over timing, so it takes longer to get projects to go live than we expect. The ramp-up in revenues will be later. But at the moment, this is our best view of the likely outcome for these cohorts. It is this growth in subscription revenues as customers we go live, which gives us confidence in the strength of subscription revenue growth over the medium term.

Turning now to software engineering revenues. Software Engineering revenues were down 17% from a very strong first half last year, although 43% higher than the year before. Within this, chargeable development work for new subscription customers decreased by GBP 2.7 million, with development work for existing customers down GBP 0.5 million. Offsetting this, customized license revenue was up GBP 1.7 million to GBP 2.8 million, reflecting the completion of the accounting on our last significant perpetual license sale.

We're now into the perpetual license tail at GBP 4.8 million on the balance sheet at the half year, which will be GBP 3.9 million by year-end. It will steadily unwind with GBP 1.7 million recognized in 2027, GBP 1.1 million in 2028, with the balance declining through to and finishing in 2031. There was no one-off license revenue recognized in H1 2026. TCV is down 29% on June 25, reflect that lower level of future charge or development work for new customers. I would note though that while TCV is down from December, our visibility of future work has improved since then. That work is not yet in TCV, and this is an area where we could do better than current expectations if client approvals come through more quickly.

Turning to our final revenue stream delivery. Delivery revenues were up 5% year-on-year. 54% of delivery revenue relates to new customers in definition or implementation, up from 40% last year. which again speaks to the volume of new customers moving through the pipeline towards go-live. Partner days were 8% of our total delivery days, slightly higher than the 7% last year. TCV is up 22% on June 25, primarily driven by 2 new customer wins, and you can see the improvement in coverage across both the next 12 months but particularly in the period after 12 months. We are looking to recruit more people into delivery for 2027 as looking at TCV on our late-stage pipeline, we need to increase the people to deliver the growth we expect. We have 44 customers contributing to delivery revenues, up from 43. Within that, live V5 and AS6 customers have increased from 26 to 28, and we have 3 new customers not yet live, up from 11.

Turning now to cash flow. Cash conversion was 76% for the half year. This is lower than our normal level, but as a result of the very high conversion of 108% in the second half of 2025, which included GBP 2.8 million of accelerated receipts in December. So this is a timing effect between the halves rather than any change in the underlying quality of our cash generation. I've included the cash flow performance by half in the appendix to demonstrate this. Our modeling guidance for cash flow remains unchanged. Capital expenditure remains in line with the prior year.

Net tax payments increased to GBP 4.7 million. Last year benefited from cash received on R&D claims, and we've had none of that so far in 2026. We paid GBP 13.7 million dividends in the period made up of the GBP 4.5 million ordinary dividend and the GBP 9.2 million special declared with the full year results.

Now some words on capital allocation. Alfa remains a strongly cash-generative business, and our approach to capital allocation remains disciplined. We continue to generate excess cash even after allowing for the investment we are making in the business. For the last 5 years, we've paid an ordinary dividend and then returned excess cash to shareholders through special dividends and buybacks. Having reviewed current market conditions, we've decided to retain the excess cash for the time being to provide us with optionality over how we use it. If in due course, we conclude that we have no use for it, we will return it to shareholders. Our policy of paying an ordinary progressive dividend remains unchanged, and the amount to be paid for 2026 will be announced with the full year results.

Next, a brief update on modeling guidance. Starting with the outlook for 2026. We expect continued growth in subscription revenues. Delivery revenues will grow more slowly than we originally expected, but we expect that to be offset by improved Software Engineering revenues so that overall growth is broadly as we anticipated. Capitalized development costs are expected to continue at similar levels to 2025. As the capitalization of internally generated intangibles has grown and those assets come into use, amortization will increase to a similar level as capitalization.

Cash conversion is expected to be 80% to 90% for 2026 as a whole, which is unchanged from what I said in March, notwithstanding the 76% in the first half. The effective tax rate is expected to be around 26%, slightly higher than the U.K. corporate tax rate, reflecting the overseas territories we now operate in. On currency, the sensitivity shown up for a full 12 months and unchanged from previously disclosed and ignore the impact of hedges. For profit, we are fully hedged on U.S. dollars. So any movement in the U.S. dollar exchange rate will have no impact on profit. We do not hedge account, and so revenue is unaffected by our hedges. And so a $0.01 movement in the average exchange rate for the second half would have half the full year effect i.e., GBP 250,000 impact on revenue.

I will now hand over to Matt for an operational update.

Thank you, Duncan, and hello, everyone. I'm going to start, as I always do, with a reminder of our strategy. And as a reminder, it's not an update. Our strategy is stable and it's consistent, and we see that as a very good thing. But I think that the reminder is important because the most important thing to understand about Alfa is the context in which we operate, and that is, the market that we serve is extremely complex, highly regulated, infinitely demanding and ever-changing.

Our opportunity is huge. We're the leading player in a massive market, and we currently have only a small market share. So our strategy for creating long-term sustainable business value is designed to maximize and enable us to grasp that opportunity. And that strategy is to strengthen to grow our differentiation by investing in our 3 key differentiators: our smart, diverse team, our product and our delivery methodology in tooling.

Secondly, to sell to enable profitable growth by focusing on building our community of single-tenant SaaS customers, increasing our subscription revenue and enabling incremental sales. To scale, to increase our capacity for developing and delivering out the systems and to extend our reach. And finally, to simplify to enable more concurrent Alfa systems implementations more efficiently. And I'm going to focus in a little more on this final aspect of our strategy, simplification this morning.

Reducing friction in the implementation of Alfa systems has been a key element of our strategy for a long time. Doing so will lower the cost of delivery, shorten the time before customers go live and allow subscription revenues to begin flowing sooner. Just as importantly, it improves the economics of projects for customers. We are and we have always been the premium provider in our industry. by reducing delivery costs, we will enable prospects that may previously have been too small or too cost sensitive to justify an Alfa implementation to afford an Alfa the premium offering.

To repeat our market share is actually very small. So the amount to go after is huge. So we expect reduced cost per implementation to result in us being able to reach significantly more customers. AI provides fantastic tooling for increasing the efficiency of the implementation process. The technology is improving quickly and we're seeing real benefits.

Data migration provides a great example use case. In 1 example, we've seen the effort required for development of data transformation code reduced by 75%. and AI provides a fantastic tool for reconciling the migration output as well. Our AI-enabled Alfa Recon tool is one of our biggest incremental sales opportunities. But importantly, most of the work carried out as part of an implementation of Alfa systems is done not by the Alfa team, but by customers or by implementation partners.

The role of the Alfa team is generally to provide expert assistance in implementation tasks and our implementation partners are also investing in AI as a simplification technology and they're competing with each other to find the most impressive efficiency gains. So again, the reduce -- the result of this is reduced implementation costs and increased addressable market.

Moving on to our product and our market. As I said when presenting our FY '25 results, we see AI amplifying the value of Alfa's product. Alfa systems value has never simply been the code base. It's the combination of decades of domain experience embedded within a SaaS platform built for one of the most complex vertical markets in enterprise software. We provide a governing control plane for the world's largest and most complex finance organizations. At its core, sits a robust ledger and system of record for auto, equipment and commercial finance, providing a vast, well-structured data framework.

Around that are deterministic transaction processing configurable workflows, embedded authority models, security, resilience, integration capabilities, scalability, performance and extensibility, and the embedded and configurable workflows are standardized, they're auditable, they're repeatable, reversible and integrated. Now these aren't just technical features. They form a trusted operational platform for highly regulated businesses, and customers can rely on us to evolve with the pace of technological change, allowing them to focus on enabling investment in the economies that they serve rather than being distracted by fast-moving technology.

And alongside all of that, there's Alfa clouds, SaaS, delivery and implementation track record. Those provide huge competitive advantage. And while we expect AI to enable efficiencies, including head count reductions for our customers, Alfa systems is priced based on the number of asset finance contracts managed on Alfa rather than per user. So our revenue model is not impacted by increasing customer efficiency.

Next, a few words on Alfa systems AI functionality. Our Alfa systems AI products now live under one umbrella brand, Thea. Thea core is the layer within Alfa systems that allows Alfa innovations to communicate safely and efficiently with AI, regardless of the underlying service. Importantly, this is only available for Alfa Cloud customers, providing a compelling case for upgrade for customers not yet using our SaaS offering.

An example of a quality of life feature built on Thea Core is via notes. This provides a summary of notepad entries for an agreement, which is hugely powerful for many of our customers. Thea Lens provides intelligent document processing functionality. Alfa can already work with third-party IDP solutions are now working on our own functionality in this area, powered by Thea Core. And Thea Connect provides a model context protocol or MCP server. This has not yet been launched as part of our marketing agenda, but it is available, for example, use cases. And MCP is an emerging standard for connecting AI assistance to business systems, and it's now firmly part of conversations with our customers and with prospects. Thea Connect is likely to be key in allowing customers to plug AI tooling directly into helper processes.

Moving on from AI, and we've progressed with our key market expansion exercises in fleet, commercial finance and U.S. auto originations. All 3 are progressing with customers, which is our preferred methodology for investment. U.S. Auto ignitions is exciting because of the scale of the opportunity. Every U.S. auto finance provider requires originations functionality, and this is a new addition to our offering, the value is substantial. Fleet is exciting because it opens up the European auto finance market, where auto fleet management often sits alongside retail finance.

Our first implementation of our fleet functionality is progressing well. And commercial finance is an adjacent market, which will, in time, increase our TAM and we're stepping up our marketing efforts within the commercial finance well. We're also investing in our portal for customer and dealer access, again, with customer partnerships. And we've completed a pilot accelerating software development using AI tooling, we've had some excellent results. We found many compelling use cases, and we're now moving into a BAU phase. We expect to have usage of this exciting tooling to continue to increase the pace at which we can deliver new features for customers.

We continually assess the shape of the team required in order to deliver efficiently for customers. We've seen reduced demand for customer-led enhancement of our software, and we've reshaped the team in response. In the first half, this has resulted in 31 nonvoluntary departures from Alfa, mainly from product engineering. We've continued to recruit where demand is stronger, including into cloud hosting operations and into delivery with both graduate and experienced hire recruitment. We've refreshed our new high induction material, and we're now rolling this out in all regions.

The new approach enables new hires to be onboarded more efficiently and more effectively. And our cross-company program of AI literacy ensures that all areas of the business have the resources that they need to maximize opportunities for efficiency. For example, every business area has AI champions as points of contact to roll out and adapt learning and development materials for their group. We have a fantastic team and a culture of delivery and of growth all focused on building this special company together. 2026 people initiatives include our culture playbook, ensuring that we maintain and grow our culture as we scale our team internationally.

Our unrivaled track record of delivery continues, and it's this ongoing delivery, the layers new subscription revenues onto our model. In the first half, we achieved 2 go-lives of new Alfa System 6 customers. The first was for an existing Alfa V4 customer, which upgraded on to AS6. The go line involved migrating portfolios in 2 different countries onto a single segregated instance of Alfa Cloud. The upgrade allowed our customers to simplify their internal systems infrastructure as well as to access the product benefits of the latest version of Alfa.

The second new customer go live was for a limited new business payment, but with a ramp-up in new business volumes expected over the coming months and with migrations of the existing finance book expected to follow. In due course, the result will be our largest Alfa cloud implementation. So we expect this customer to be an important part of our growth in the coming years. We've also sold a new subscription upgrade product to our first customer. This is a win for our customer as well as for Alfa for our customer access to upgrades on a subscription basis makes costs predictable and upgrades easier to access.

For Alfa, the new model increases subscription revenue and assigns to us the benefits of increasing efficiency. And we're confident of further sales of this product in the future. So we have the leading product, an outstanding team and a clear track record of delivery in a complex vertical where competitors frequently fail. Our market opportunity is huge. Our simplification agenda accelerated by advances in AI tooling will enable us to reach more customers and layer high-value recurring subscription revenue onto our model more efficiently and investment in our product is expanding our opportunity. So we're really excited about the future.

And I'll hand over to Andrew Denton for an update on the prospects for future customers.

Thanks, Matt. I'll continue with the business and sales update. We're pleased with the progress we've made in the pipeline since our full year results. During the first half, we converted 2 prospects into wins, demonstrating the continued demand for Alfa systems, and the effectiveness of our sales strategy. At the same time, we maintained a strong late-stage pipeline of 9 prospects spanning multiple geographies, customer types and industry segments. Importantly, several opportunities have continued to advance through workshops and contracting activities. And we are already undertaking paid work with some of these prospects. This remains a key indicator of commitment and provides a strong foundation for future conversions.

The pipeline is geographically diverse across the Americas, Europe, the U.K. and broader international markets. We continue to see particular interest in our investments in originations, fleet and commercial finance, reinforcing our belief that expanding the product capabilities increases our addressable and serviceable markets and strengthens Alfa's competitive position. And we've been particularly pleased with the level of incremental sales driven by our new commercial finance modules.

So looking forward, demand for assets and automotive finance remain -- software remains strong. What continues to differentiate Alfa is the combination of our people our product and our delivery track record. These advantages have underpinned our success to date and remain central to our long-term strategy. Artificial intelligence is creating exciting opportunities across our business. As Matthew explained, we are using AI to accelerate software development, simplify implementations, improve internal efficiency and create practical functionality for our customers with entrusted Alfa workflows.

We are particularly pleased with the progress of our Thea AI product group. We continue to invest in market expansion through originations, fleet and commercial finance, and we believe these investments will continue to support future growth in both delivery and subscription revenues. While foreign exchange remains a headwind given the success of our North American business, our expectations for the full year remain unchanged, and we continue to see a significant opportunity ahead of us.

So to summarize, the first half of 2026 has seen continued progress across the business. Subscription revenues grew 14% and subscription TCV increased 22%. ARR grew 17% and net revenue retention remained strong at 110%. We Subscription revenues now represent 37% of total revenue, demonstrating the ongoing transition of Alfa towards a business with a larger recurring revenue base. Sales performance was encouraging, with 2 new wins, growth in total contract value to GBP 247 million and a healthy late-stage pipeline of 9 prospects. And we continue to see strong interest across the markets we serve and good activity in the earlier stages of our pipeline.

We continue to invest in our product, in our people and in delivery capability. Investment in originations, fleet, commercial finance and AI is expanding our addressable market and strengthening our competitive differentiation while AI is helping us simplify delivery and accelerate element. Most importantly, we remain confident in our future prospects. The combination of a growing subscription base, a strong pipeline, expanding market opportunity and continued product innovation positions Alfa well for the remainder of 2026, far beyond. Thank you for listening.

Thank you for the presentation. We have had a number of questions presubmitted and submitted live. [Operator Instructions] We're now moving on to our first question. Revenue only up 4%. That's a big step down from where we used to see Alfa. Is this the new norm? Or does H2 pick back up?

Okay. It's Duncan Magrath, I'll take this one. I think the best way of thinking about this is to think of the 3 different components of our business or the 3 revenue streams. If you think about delivery business being roughly 50% of the business, if you think of subscription being 35% to 40% of the business and Software Engineering being 10% to 15% of the business, if you've got those blocks in your mind. And we've got very different growth characteristics of each of those blocks. So if you look at the first half, if you look at those blocks, as we've talked about, subscription was up delivery was up 5% and Software Engineering down 17%. So the 4% is very much a combination of those 3 different parts of the business.

So if I deal with it in 2 bits, what is -- does the second half pick back up. If you -- in terms of the profile of each of those pieces of business, I'm expecting subscription revenue to be slightly stronger growth in the second half and delivery in Software Engineering to be similar. So we should see growth being slightly higher than the first half, but not dramatically higher. So overall, for the year as a whole, the analysts have us on about 6% growth for the second half, that gives us to sort of nearly 5% growth for the year as a whole.

The question also says is this a new norm? And I think if you, again, look at those blocks of the business, again, it's not the biggest one, delivery, half the business at the moment. We still expect delivery typically to be somewhere between mid-single-digit to high single-digit growth. So let's call it 5% to 8% type growth per annum is not a bad sort of medium-term indicator for that business. And if that's driving half the business, then you've got sort of 2 to 4 percentage points of growth for the whole company coming from that part of the business. Subscription, 35% to 40% of the business, mid- to high-teens growth is where we would be expecting that business. And so you can see that we would be getting 5 to 6 percentage points growth from subscription for the whole of the business. So before Software Engineering, we're about anywhere between sort of 6% to 8% -- sorry, an 8% to 10% growth business.

And then Software Engineering is the one that's much more difficult to predict because it really much depends on what's coming through the pipeline, the nature of the customers. et cetera. So I think no, it's not the new normal. I think if you were modeling something I've said it before, modeling Software Engineering as a sort of flat part of the business wouldn't be a bad place to start. It will be sometimes much better than that, and sometimes it will be below that, which we've seen this year. So not a new normal. And I think the important part is strategically, we're trying to grow the subscription part of the business as a proportion that will grow as a whole and the growth in that part of the business is the fastest-growing part of the business.

Thank you. Well, we have 2 now for TCV. So the first question, TCV up 17%, but revenue barely moving. What's the lag time on all the contracted work actually converting? And then the second question is how confident are you that the current TCV growth will translate into sustainable growth earnings.

Yes, I'll take that one as well. And again, I think if you think of those individual building blocks, it's important to think about it that way again. So TCV was up 17% year-on-year. A lot of that growth came from subscription. So GBP 31 million of the overall GBP 36 million of growth in TCV came from subscription, as I said, the fastest-growing part of our business. GBP 11 million of growth came from delivery and actually Software Engineering was a reduction of GBP 6 million. So it's the same picture as revenue growth that I just walked through. So in terms of the lag, it's very much where we'll see the growth percentages that I just talked about coming through. And it's more the makeup of the TCV and how that plays out is the important thing. So the big growth driver will be the movement -- the biggest growth driver is obviously subscription revenues, that's the fastest growth.

In terms of confidence, the second part of the question, which is translated into sustainable earnings growth. I covered on one of my slides why we're confident in that subscription mid- to high-teens growth going forward because as customers go through implementation, you get to go live a number of contracts on the system increase and our subscription revenues increased. So we are confident in the subscription growth number. We're confident also in the delivery because of the late-stage pipeline. And again, I'll come back to the fact that Software Engineering is a little more difficult to predict because it very much depends precisely on what needs new customers might need for changes to the software.

But we've always looked ourselves a Rule of 40 type of business over and meet any sort of medium-term time frame and that's always been around the sort of 30% type margin business with a 10% to 12% overall growth rate. And we still believe that's the shape of the business that we are today.

Brilliant. So the next question is about Software Engineering. Software Engineering revenue is down 17% year-on-year. Is that just normalizing after last year's bumper year? Or is client work dry up?

Let me have a go answering this, Andrew Dickson here. So as Duncan said, it's actually quite difficult to accurately forecast Software Engineering revenue. This is partly because it's very closely linked to the timing of new customer wins and also customer requirements. But if we actually look at the figures, the GBP 8.6 million that we reported in the first half of this year, whilst it was down against H1 '25, it was still up significantly against the first half of 2024, where we reported GBP 6 billion worth of Software Engineering revenue.

So to some degree, it is really a function of timing. However, I think at the same time, it is worth noting that the first half of this year did include GBP 2.8 million of customized license revenue, which is expected to be slightly lower in future periods. I think that's the best explanation I can give for that.

Brilliant. So moving on to our next question. Do clients ever build this build this stuff in-house instead of buying Alfa systems. Is this still a competitive threat? Or has that basically gone away?

It's Andrew Denton here. I'll have a go at that one. It definitely used to be more of an option. We -- if we look at our total addressable market of just over $3 billion per year annual spend, about $1 billion of that is spent on self-build systems. But things certainly seem to have changed. We're in a position now, I think, where large institutions are more inclined to do what we call stick to the knitting and concentrate on being large institutions.

And why is that? Well, there are a number of problems with self-build. One of them is what does good look like. People are investing in these large technology-led transformations in order to make their businesses better. And there is a real risk that what you end up doing is pouring concrete around our existing business processes, whether they're good or bad. There's the risk. We've had 36 years of refining our system. If you're building your own right now, you have to get it right first time. There's the fact that it might fit you like a glove right now, but nobody knows what the future will bring and you've got a better chance of retaining the flexibility you need to be future competitive by buying a package.

And then finally, all of the regulatory change is on you going forward. whereas you buy something like Alfa, and we will take care of it. We'll also take care of what the regulatory change looks like. So pretty compelling reasons not to do it, I think, which is what these organizations are seeing as why they're not on the whole doing it. There might be a question within the question around AI. We're often asked about the threat of AI creating a situation where people build these systems. We're very certain that nobody is going to live code or cloud code and Alfa.

On AI, as we're finding internally with our users, the likes of card definitely speeds up development. But speeding up, development doesn't actually solve any of the risks I just outlined.

Brilliant. So on to the next question. Share price was over 200p earlier in the year, and now it sits just at 167p. A reasonable performance today, but why do you think the market keeps marking this down when the underlying numbers still look decent.

I'm going to take this one again. I'm not as far as to say today has been a good day. I'm looking at 173p, but you're right. I think that the market doesn't quite get it. Why is that? I think some of it is within the material that Duncan outlined around the general market, not quite understanding that I use rather more [ focus ] language and say that a lot of that revenue is in the other it's just not fully cooked, which Duncan did a thermal scientific job of explaining. But either way, we are very certain that the ramp-up in subscription revenue from the projects that we're working on is around the corner for us. And I don't think that's appreciated.

And also I think sometimes the financial markets do paint with a very broad brush. So when people worry about AI, I think they worry about all technology. And I think that enterprise technology, such as the market that we're in is somewhat more impervious to the threat of AI. And then finally, it also feels somewhat like we've been caught up in what some people call SaaS Pocalypse. And that was the concern, I think that AI making businesses more efficient would that will be deleterious of revenue for those businesses that licensed on a per seat basis. We've never done that. We've always licensed on volume because even before AI Alfa made these businesses more efficient.

So a combination, I think, still is not quite understanding the business and where we're going and what our future looks like. And also us being swept up in larger market tracts movement. So I agree with the question or the implicit question there that we are somewhat undervalued and under understood.

To the next question. The big question seems to be whether Alfa can convert the strong ARR and TCV growth into earnings. What should investors expect from operating margins over the medium term?

Yes. And I think we'll perhaps deal with the other question as well. I actually we set the next question out, and then I'll deal with both of them together if that's possible.

Yes, absolutely. The next question is how much operating leverage is there in the model if subscription revenue continues growing in mid- to high teens, where could margins ultimately settle.

Great. Thanks. I mean the simple answer to the question is that we do expect margins to improve over the medium term. But let me go into a bit more detail about leverage and why I would say that Again, I'm going to break the business down into 3 pieces. Very much our delivery part of the business. The largest part of the business is -- it's basically a time and materials part of the business. We charge the number of days that we work to the clients. If we want to grow that business and do more days, we need more people. We have a partnering program as well. But without diving into that, you can see that, that business is largely driven by -- the biggest element of that component is head count and salary costs. So there's not a lot of leverage in that business to grow that business, we would employ more people.

On the Software Engineering side of the business, it's slightly different. We get -- there is more leverage on Software Engineering because the people doing what we call our product engineering team are doing 3 different things. They're doing chargeable development work for customers. They're doing our own investment into the product and they're also doing bug fixing. And so we can move those people around depending on what's happening at any point in time. So for more charge work comes in, which is a possibility, for instance, in the second half of this year, then we would potentially divert resource away from, for instance, on investment and delay some of that and do the child to work for customers. And you can see in that scenario, we've got no increase in cost because it's the same people, but our revenue has gone up, and therefore, we've got good leverage.

Obviously, leverage can work the other way. So we've seen a drop in Software Engineering that charge will work in the first half of this year. And obviously, that's dropped through to the bottom line and impacted margins. So there is definitely leverage within the super-engineering part of the business. If you look at subscription, you've got 3 components. You've got hosting where we do have effectively costs of the hosting of cloud. We use AWS. And so as the hosting revenues grow, our costs grow and we do get a little bit of leverage on people because we've automated a lot of the toolings. So we don't necessarily have to grow the hosting team in line with revenue.

Maintenance, we would get some leverage and maintaining more clients won't necessarily require the same increase in the number of people and licenses is fully leveraged, i.e. additional loan revenue will drop straight to the bottom line. So there is operating leverage. There's not a big overall fixed cost base, all of the costs I just talked about ultimately are somewhat variable. Our fixed costs are relatively small. They are a small number of offices in terms of fixed costs.

So looking forward to answer the question, we would expect margins to improve over the medium term, particularly as the license and subscription revenues grow, we would -- and therefore, that will flow through into improved margins. The one thing I think I would just caution about is that we do make all parts of our business are have good gross margins. So some businesses operate perhaps with a very, very high software part or subscription part of the business with a very low margin on the professional services business as is much closer, a much narrower spread. So we won't necessarily see dramatic increases in margins over the short term, but over the long term, gradually and quickly, that will improve.

So on to the next question. What's given the confidence to keep investing in the U.S. at this point?

So to best answer this question, it's Andrew Denton, again. I'll try to a little bit to guess the motivation behind the question. And perhaps the motivation is around understanding the effects that local and macroeconomics have on demand for our products. And clearly, the U.S. is an interesting place today. The Netherlands or the Central Bank of the Netherlands has just taken a load of gold away because they're concerned about another collapsed U.S. Canadian trade deal. And we're often asked about this kind of thing. The effect of interest rates, bond yields, political instability, what that has on demand for our product.

So if the listeners will forgive me, I'll talk a little bit about the reasons why people take that leap and spend a lot of money on a large enterprise software system and why we believe that our end market, including the U.S., is largely acyclical. We talk about push and pull factors. And perhaps some of the pull factors are wrapped up a little bit in what you might call local business confidence. Pull factors would be we want to sell different and more products. We want to be more efficient, perhaps even we want to make use of AI. And there's a degree of optionality around those. We are super interested in push factors.

Push factors will be those in-house systems that I talked about earlier on, where $1 billion a year is spent on maintaining them. what happens when they're on a mainframe and IBM decide they don't want to support it anymore or they're only accessible through Internet Explorer 1995 or something, which is a bit of an information security problem or indeed regulatory change, which I also touched on in a previous question. Those push factors mean that you don't have a choice but to try to invest in implementing a new system. And that's important for us and for demand from our end market because that demand is somewhat above local economic and political conditions.

So that brings us to the U.S. The U.S. for us in terms of our success there, whilst we enjoy having the #1 and #2 player on in equipment finance, A large part of our success there has been in automotive finance. And a large part of that success has involved what we will call captives automotive finance businesses that are owned by automotive manufacturers. And the stark reality for an auto manufacturer is you don't really buy cars with cash anymore. So if you don't have a finance division, then you're not really going to sell any cars or combine harvesters, the same applies through.

So the combination of the fact that -- there are reasons that are not about local economic confidence that are bringing people to market and the fact that they have to be able to support their finance arms mean that in the U.S. and indeed in other target markets, we are very confident that demand will carry on, and we're happy to invest in them.

Thank you very much. So moving on to the next question. With only 9 customers still on version 5, are we nearing the end of the major upgrade opportunity.

I'll answer this one. It's Matthew White here. I'll attempt with 1 eye on the clock to give a quick overview of the evolving versions of Alfa systems. Alfa systems be 5 was launched in 2010 and was a technical rewrite a replatforming of Alfa systems version for Alfa System V5 was fully Java and front to back and we maintained the database structure, which enabled us to ensure that we were able to make that upgrade as painless as possible for our existing customers, and we're very pleased with the number of customers, in fact, almost all customers have at some point over the intervening period upgraded from Alfa Systems V4 to V5, but it was a technical upgrade, and it required a considerable amount of effort from us and from our customers.

We now have only one customer who is yet to start an upgrade, and we have 2 customers upgrading from our Alfa systems version to the latest versions of Alfa systems. The market has at times seen that version 4 to the latest versions of Alfa seen that as a major upgrade opportunity. And it's true that it gives us an opportunity to move customers onto our cloud hosting operation. But actually, there's always been a license fee drag in terms of that upgrade because Alfa systems version 4 customers all have perpetual licenses.

Alfa Systems Version 6, AS6 was launched a couple of years ago. We -- after many years of technical and functional investment in Alfa systems versions 5. We -- I think a phrase used was that we felt we could no longer call it Alfa Systems version 5. We had to start referring to AS6. The -- however, the move from version 5 -- the final release of version 5 to the first release of AS6 was simply a single time box and the upgrade from Version 5 to AS6 for our customers is frictionless and certainly not an opportunity or an engagement along the same lines as the V4 to V5 upgrade.

Brilliant, thank you. On to the next question. Do you envisage any material decrease in delivery revenues in the short to midterm?

Matthew White again. I'll answer the question, but perhaps attempt to get to the sense of the question as well. So no, we don't envisage any material decrease in delivery revenues. In fact, as I think Duncan was describing earlier, and we see delivery revenues continuing to grow. Perhaps the reason for the question is around the efficiencies that we're adding to the implementation process. and therefore, per Alfa systems implementation, we might expect a like-for-like implementation to take a little less effort. That's a process that's been ongoing for many years. It's for many years been our strategy to simplify the implementations of Alfa Systems and therefore ensure that our like-for-like implementation requires less effort. And that has been ongoing for many years as well.

We do see AI providing additional opportunities for that simplification process. But because of the size of the opportunity we see it enabling us to take on additional implementations and thereby, to layer on additional subscription revenue more efficiently, more effectively and to continue to grow our business.

Brilliant. Thank you. So we'll come to our final 2 questions here. The next question, could you kindly elaborate on the growth you expect on the expansion, new markets over the midterm.

Absolutely. Andrew Denton, again, I'll take the last couple of questions to bring us to the close. I myself unusually sat across from 2 CFOs for the first time of these kind of questions. So I'll be very careful not to give guidance that we haven't done before. So we're looking, as the question I'm sure fully understand is we're looking at fleet and commercial lending as expanding our TAM, our target addressable market and originations, expanding our SAM or serviceable addressable market.

So in terms of the timing of effect, that's relatively easy with fleet because one of the customer wins that we have announced with in the half is a very well-known auto manufacturer who is doing fleet with us for their U.K. subsidiary, and we're very excited about that. And that's already in our revenues. So that's relatively straightforward.

Probably in terms of timing, and quantum, I would say, originations is next. Why is that? Well, as an exemption of a serviceable addressable market, it's a market that we're already in and understand very well. So people like us will often talk about GTM or go-to-market approach with U.S. auto originations, which is where the major opportunity lies, that's straightforward because we knock on the world, everybody who's bought the servicing system from us, and we say, would you like to find an origination system. And we think that the market is somewhat underserved and therefore, we have a great opportunity.

The third in terms of timing but then I'll contradict myself slightly is commercial lending because commercial lending really is a very new market for us. So we're already going to trade shows and spreading the word, and we're getting ourselves known there but it is very much a new market, but that degree of difference also drives large opportunities because we think the target addressable market for commercial lending is several times the size that it is for our core and home asset finance market. So a big opportunity, but we've got a little bit of work in terms of making a mark there, although we did note that one of the opportunities in the pipeline involves some commercial lending.

The bit where I contradict myself is, as I said in the presentation, commercial lending, some of the functionality that we're building is also usable within asset finance market. So the big commercial lending price might perhaps be a little bit down the road, but driving incremental sales for us, well, that's today. So hopefully, that's given a [indiscernible] of question.

Brilliant, thank you. We're now moving on to our final question. If you have any further questions, please e-mail the team who will respond to any questions that weren't covered today. So a final question. With subscription revenue becoming an increasingly large portion of the business, should investors expect Alfa's earnings to become more predictable and less dependent on the timing of implementation projects.

I'm guessing that the person who asked the question was hoping for a little more than yes. But the main answer there is yes. I suppose we should think about why and why it's such a huge part of our strategy. One of the things that we've been working on in -- over the past 5, 6, 7 years, actually is resiliency within our business. We want to create a situation where we are less dependent on those projects starting.

That's a tale of 2 KPIs, if you like. One of them, we feel we've really done a great job in making progress on to the extent that we talk about it less these days, and that is customer concentration. The percentage of our revenue that comes from our top 5 customers is very much markedly different to the way you see subscription, we're still growing. And we really feel that we can get to a point where subscription as a percentage of our revenues is far higher. And there's a reason why the financial markets are very keen on committed annually recurring revenue because of exactly how the question characterized the question.

It does make earnings a whole lot more stable, particularly when you add in the fact that from our perspective, in Alfa System 6 and Alfa version 4, we don't have any competitive churn. So a 0 churn business with a hard percentage subscription revenue is very stable and very predictable, and we're working hard to make it even more stable and more predictable by increasing that percentage of subscription revenue.

Brilliant. Thank you. We currently have no more further questions. I'll hand back to the management team for any closing remarks.

No massive remarks from us from to hope that it was helpful to those people who took the time out of their busy days to dial in. And of course, thank you for doing that. We see you the next one.

Thank you.

Hello, everyone, and welcome to Alfa Financial Software's 2026 Half Year Results Presentation. As always, I'm joined by Matthew White, Alfa's COO; and in his final results performance before retirement, Duncan Magrath, Alfa's CFO; and for the first time by Andrew Dickson, Alfa's incoming CFO. Duncan will take you through the financial review. Matt will cover operational delivery, and I'll return later to talk about the business, our sales progress and our outlook before we summarize and open for questions. So stepping back and looking at the first half as a whole, we are pleased with the progress we've made. Subscription revenue grew by 14%, subscription total contract value by 22% ARR grew by 17% and net revenue retention remained strong at 110% Subscription revenues now account for 37% of total revenue, which reflects the continued evolution of Alfa towards a larger recurring revenue business.

Sales activity has also remained encouraging. We secured 2 wins during the first half and total contract value increased by 17% to GBP 247 million. And we continue to see good activity across both the late-stage and early-stage pipelines. We are already working with 3 of the 9 prospects in our late-stage pipeline, which gives us confidence in our future opportunities. We have continued to invest in our product and delivery capability. During the period, we invested GBP 19.6 million in software, particularly in originations, fleet, commercial finance and our AI capabilities. We also achieved 2 go-lives during the half, which is an important validation of both our product and delivery approach. Looking ahead, we remain confident in our full year expectations.

We see artificial intelligence as an exciting opportunity to enhance our product, accelerate development and simplify delivery while continuing to create value for our customers. Turning to the key financial highlights. Revenue was GBP 65.1 million, representing growth of 5% at constant currency. Total contract value increased 17% to GBP 247 million, and ARR increased 17% to GBP 48.5 million. Subscription revenue grew 14%, while net revenue retention remained very strong at 110%. Operating profit was GBP 18.4 million and operating margin was 28%. Excluding the impact of severance costs and FX hedges, operating profit was ahead of last year by 2%, with operating margin only slightly down on last year. Duncan will cover this later.

Cash conversion for the first half was 76%. That was influenced by the timing of customer receipts between the second half of last year and the first half of this year. Duncan will discuss that also in more detail shortly. Overall, these results reflect continued growth in our subscription business, ongoing investment in the product and good momentum across both the sales pipeline and delivery organization. Before handing over to Duncan for the financial review as usual, I would like to welcome Andrew Dickson, who recently joined us as CFO and who will formally succeed Duncan on the Board on the 16th of September. Andrew, perhaps you'd like to introduce yourself.

Thank you very much. Since joining Alfa a couple of months ago, I've got to know people both in EMEA and the U.S. I've been hugely encouraged by what I've seen, and I'm really looking forward to taking over from Duncan when he steps down the Board in a couple of weeks' time.

Thanks, Andrew. The first half of 2026 was a solid financial performance against last year, which was always going to be a tough comparator. Revenue was up 4% at actual rates or 5% at constant currency, with growth in subscription and delivery revenues, partially offset by a lower level of software engineering revenue and the very strong first half of 2025. The gross margin percentage was down 400 basis points. Two things to note here. Firstly, last year, we had a very high level of chargeable software engineering revenues. And secondly, the margin in this period is weighed down by severance costs. Operating profit was down 15%, delivering an operating margin of 28.3%, although very much impacted by severance costs and FX hedges.

Excluding these, operating profit was actually ahead by 2%, with the operating margin only slightly down on last year. The effective tax rate of 26.4% was in line with 2025. Turning now to the cost lines in a little more detail. Cost of sales was up 16% and SG&A up 12%, but both lines are distorted by the severance costs and FX hedges. In the first half, we incurred GBP 1.6 million of severance costs, including the associated legal fees, and this was split GBP 1.2 million into cost of sales and GBP 0.4 million into SG&A. In relation to FX, we had a GBP 1.7 million gain on the U.S. dollar hedges in 2025 compared with a GBP 0.3 million loss on the hedges in 2026. So the year-on-year swing on that line alone is GBP 2.0 million.

Strip both of these out and the picture is much more measured. Cost of sales increased 10% and SG&A was up just 2%. Within SG&A, profit share is down GBP 0.5 million or 19%, simply reflecting lower profits with share-based payments also being down. Depreciation and amortization was as expected, up GBP 0.6 million or 39%, and I'll come back to the trajectory of amortization under modeling guidance. Other operating costs were up 6%, driven by the growth in headcount and the cost of expanding into new markets and territories. Turning now to TCV. Total TCV grew 17% to GBP 247 million, up from GBP 211 million this time last year. Looking at the revenue streams, subscription TCV and delivery TCV were both up 22%, with software engineering down 29%.

The software engineering reduction reflects a lower level of chargeable development work needed for new customers. As the profile of new customers changes, so will TCV. Next 12 months TCV was up 12% to GBP 101 million from GBP 90 million last year, again, with growth in subscription and delivery, partially offset by the reduction in software engineering. As I flagged that last year, we now supplement the TCV disclosure with ARR and NRR, and I will turn to these next. Annual recurring revenue was up 17% at 30th of June 2026 to GBP 48.5 million from GBP 41.6 million. As a reminder, we calculate this by taking the average subscription revenues over the last 6 months and annualizing them, and we exclude any revenues, which we do not expect to last 12 months at the point of origin.

That 17% growth is very much in line with the underlying growth in subscription revenues. Net revenue retention was 110%. To help understand this, I've included a breakdown in the table. We are, in effect, a zero churn business for Modern Alfa Systems, and so I've started the table at the base of 100%. We then have a 3% drag from one specific terminating V4 customer who gave notice back in 2018 and has not yet fully transitioned away from Alfa. We grew 6% from net upsell across the existing customer base and grew 7% from new customers not yet live. It is the impact of new customers not yet live that I will return to in a minute because I'm not sure that this future growth is sufficiently understood by everyone. So looking now at overall subscription revenues. Subscription revenues were up 14% on last year to GBP 24.1 million.

Looking at the breakdown, 73% came from customers already live on V5 or Alfa System 6, 20% from new customers currently implementing AS6, 4% from customers upgrading from V4 and the remaining 3% from V4 customers who've not yet upgraded. Subscription TCV was up 22% on last year, driven by growth from both new customer wins and the existing customer base, which underpins our confidence that this revenue stream will continue to grow strongly. We now have 44 customers contributing to subscription revenues, up from 41. Within that, Alfa Cloud customers on V5 or AS6 have increased from 23 to 24 with a further 3 in the late-stage pipeline, up from 1 last year. We have 15 customers on private cloud and 2 remaining V4 customers.

As I've said before, we do not expect to convert every private cloud customer, but we would expect to convert many of these over time, and that remains a potential incremental source of growth for the next few years. Staying with subscription, I want to dive a bit more into the growth from customers not yet live on Alpha. I've shown this slide before. It shows the history of our V5 and AS6 customer base, and I've previously used it to make the point that there has been 0 competitive churn. I'm showing it again, but wanted you to focus on the customers in implementation at the top. We currently have 15 customers in implementation, of which 2 are V4 upgrades.

So there are 13 new customers who will drive future subscription growth once they go live and reach their full run rate revenues. All the customers in implementation started from 2023 onwards. I will show on the next slide how the customers in implementation who we started work with in 2023, 2024 and 2025 will strongly contribute to the future growth in subscription revenues. Many of you will be familiar with the illustrative graph I produced a few years ago, showing the typical life cycle of a contract. I've shown a small copy of this at the top of this slide as a reminder and repeated the full slide in the appendix. This time, rather than using illustrative figures, I will be demonstrating with actual and internal forecast data.

The previous slide showed all V5 customers and was organized by when we started working with them. I have taken the 2023, 2024 and 2025 cohorts and excluded any of those which are customers upgrading from V4 to only including new customers. The 2023 cohort is deep orange with 5 customers in it. The 2024 cohort is medium orange with 6 customers in it and the 2025 cohort is the light orange with 2 customers in it. It shows revenue by half years with actual data from H1 2023 up to and including H1 2026. It then shows internal forecast data for the periods after that. You can see how the revenues build as customers move through implementation to the go-live.

It is important to note that this only shows revenue from customers we started working with in those years, and so it is not total subscription revenues. It is intended to show how the new customers in implementation are a significant contributor to overall growth in subscription revenues. The overall percentage rate growth rates will be lower than this once you add existing live customers into the figures. You can see that the growth in revenues from the 2023 cohort starts to flatten off in 2027 and 2028 as those customers reach go-live and hit their full run rate. If you compare the revenue for these 3 cohorts in 2026 to 2028, you will see that the revenue more than doubles over that period.

These are revenues from customers we are working with today, and there is no contribution here from customers we are not yet working with. We can be pretty certain that unless the project stop, this growth will come through into our subscription revenues. There is some risk over timing, so it takes longer to get projects to go live than we expect. The ramp-up in revenues will be later. But at the moment, this is our best view of the likely outcome for these cohorts. It is this growth in subscription revenues as customers reach go-live, which gives us confidence in the strength of subscription revenue growth over the medium term. Turning now to software engineering revenues. Software engineering revenues were down 17% from a very strong first half last year, although 43% higher than the year before.

Within this, chargeable development work for new subscription customers decreased by GBP 2.7 million with development work for existing customers down GBP 0.5 million. Offsetting this, customized license revenue was up GBP 1.7 million to GBP 2.8 million, reflecting the completion of the accounting on our last significant perpetual license sale. We're now into the perpetual license tail. We have GBP 4.8 million on the balance sheet at the half year, which will be GBP 3.9 million by year-end. This will steadily unwind with GBP 1.7 million recognized in 2027, GBP 1.1 million in 2028 with the balance declining through to and finishing in 2031.

There was no one-off license revenue recognized in H1 2026. TCV is down 29% on June '25, reflecting that lower level of future charge for development work for new customers. I would note, though, that while TCV is down from December, our visibility of future work has improved since then. That work is not yet in TCV, and it is an area where we could do better than current expectations if client approvals come through more quickly. Turning to our final revenue stream, delivery. Delivery revenues were up 5% year-on-year. 54% of delivery revenue relates to new customers in definition or implementation, up from 40% last year, which again speaks to the volume of new customers moving through the pipeline towards go-live. Partner days were 8% of our total delivery days, slightly higher than the 7% last year.

TCV is up 22% on June 25, primarily driven by 2 new customer wins, and you can see the improvement in coverage across both the next 12 months, but particularly in the period after 12 months. We are looking to recruit more people into delivery for 2027 as looking at TCV and our late-stage pipeline, we need to increase the people to deliver the growth we expect. We have 44 customers contributing to delivery revenues, up from 43. Within that, Live V5 and AS 6 customers have increased from 26 to 28, and we have 13 new customers not yet live, up from 11. Turning now to cash flow. Cash conversion was 76% for the half year. This is lower than our normal level, but is a result of the very high conversion of 108% in the second half of 2025, which included GBP 2.8 million of accelerated receipts in December.

So this is a timing effect between the halves rather than any change in the underlying quality of our cash generation. I've included the cash flow performance by half in the appendix to demonstrate this. Our modeling guidance for cash flow remains unchanged. Capital expenditure remains in line with the prior year. Net tax payments increased to GBP 4.7 million. Last year benefited from cash received on R&D claims, and we've had none of that so far in 2026. We paid GBP 13.7 million of dividends in the period, made up of the GBP 4.5 million ordinary dividend and the GBP 9.2 million special declared with the full year results.

Now some words on capital allocation. Alfa remains a strongly cash-generative business, and our approach to capital allocation remains disciplined. We continue to generate excess cash even after allowing for the investment we are making in the business. For the last 5 years, we paid an ordinary dividend and then returned excess cash to shareholders through special dividends and buybacks. Having reviewed current market conditions, we've decided to retain the excess cash for the time being to provide us with optionality over how we use it. If in due course, we conclude that we have no use for it, we will return it to shareholders. Our policy of paying an ordinary progressive dividend remains unchanged and the amount to be paid for 2026 will be announced with the full year results. Next, a brief update on modeling guidance.

Starting with the outlook for 2026. We expect continued growth in subscription revenues. Delivery revenues will grow more slowly than we originally expected, but we expect that to be offset by improved software engineering revenues so that overall growth is broadly as we anticipated. Capitalized development costs are expected to continue at similar levels to 2025. As the capitalization of internally generated intangibles has grown and those assets come into use, amortization will increase to a similar level as capitalization. Cash conversion is expected to be 80% to 90% for 2026 as a whole, which is unchanged from what I said in March, notwithstanding the 76% in the first half.

The effective tax rate is expected to be around 26%, slightly higher than the U.K. corporate tax rate, reflecting the overseas territories we now operate in. On currency, the sensitivity shown are for a full 12 months and unchanged from previously disclosed and ignore the impact of hedges. For profit, we are fully hedged on U.S. dollars.

So any movement in the U.S. dollar exchange rate will have no impact on profit. We do not hedge account, and so revenue is unaffected by our hedges. And so a $0.01 movement in the average exchange rate for the second half would have half the full year effect, i.e. GBP 250,000 impact on revenue. I will now hand over to Matt for an operational update.

Thank you, Duncan, and hello, everyone. I'm going to start, as I always do, with a reminder of our strategy. And it's a reminder, it's not an update. Our strategy is stable and it's consistent, and we see that as a very good thing. But I think that the reminder is important because the most important thing to understand about Alfa is the context in which we operate. And that is the market that we serve is extremely complex, highly regulated, infinitely demanding and ever changing. Our opportunity is huge.

We're the leading player in a massive market, and we currently have only a small market share. So our strategy for creating long-term sustainable business value is designed to maximize and enable us to grasp that opportunity. And that strategy is to strengthen, to grow our differentiation by investing in our 3 key differentiators: our smart, diverse team, our product and our delivery methodology and tooling. Secondly, to sell, to enable profitable growth by focusing on building our community of single-tenant SaaS customers, increasing our subscription revenue and enabling incremental sales; to scale to increase our capacity for developing and delivering Alfa Systems and to extend our reach; and finally, to simplify, to enable more concurrent Alfa Systems implementations more efficiently.

And I'm going to focus in a little more on this final aspect of our strategy, simplification this morning. Reducing friction in the implementation of Alfa systems has been a key element of our strategy for a long time. Doing so, will lower the cost of delivery, shorten the time before customers go live and allow subscription revenues to begin flowing sooner. Just as importantly, it improves the economics of projects for customers. We are and we have always been the premium provider in our industry. By reducing delivery costs, we will enable prospects that may previously have been too small or too cost sensitive to justify an Alfa implementation to afford an Alfa, the premium offering. To repeat, our market share is actually very small, so the amount to go after is huge. So we expect reduced cost per implementation to result in us being able to reach significantly more customers. AI provides fantastic tooling for increasing the efficiency of the implementation process. The technology is improving quickly, and we're seeing real benefits.

Data migration provides a great example use case. In one example, we've seen the effort required for development of data transformation code reduced by 75%. And AI provides a fantastic tool for reconciling the migration output as well. Our AI-enabled Alfa Recon tool is one of our biggest incremental sales opportunities. But importantly, most of the work carried out as part of an implementation of Alfa Systems is done not by the Alfa team, but by customers or by implementation partners. The role of the Alfa team is generally to provide expert assistance in implementation tasks and our implementation partners are also investing in AI as a simplification technology, and they're competing with each other to find the most impressive efficiency gains.

So again, the result of this is reduced implementation cost and increased addressable market. Moving on to our product and our market. As I said when presenting our FY '25 results, we see AI amplifying the value of Alfa's product. Alfa Systems value has never simply been the code base. It's the combination of decades of domain experience embedded within a SaaS platform built for one of the most complex vertical markets in enterprise software.

We provide a governing control plane for the world's largest and most complex finance organizations. At its core, it's a robust ledger and system of record for auto, equipment and commercial finance, providing a vast, well-structured data framework. Around that are deterministic transaction processing, configurable workflows, embedded authority models, security, resilience, integration capabilities, scalability, performance and extensibility. And the embedded and configurable workflows are standardized, they're auditable, they're repeatable, reversible and integrated. Now these aren't just technical features. They form a trusted operational platform for highly regulated businesses. And customers can rely on us to evolve with the pace of technological change, allowing them to focus on enabling investment in the economies that they serve rather than being distracted by fast-moving technology. And alongside all of that, there's Alfa Cloud's SaaS delivery and implementation track record. Those provide huge competitive advantage.

And while we expect AI to enable efficiencies, including headcount reductions for our customers, Alfa Systems is priced based on the number of asset finance contracts managed on Alfa rather than per user. So our revenue model is not impacted by increasing customer efficiency. Next, a few words on Alfa Systems AI functionality. Our Alfa Systems AI products now live under one umbrella brand, Thea. Thea Core is the layer within Alfa Systems that allows Alfa innovations to communicate safely and efficiently with AI regardless of the underlying service.

Importantly, this is only available for Alfa Cloud customers, providing a compelling case for upgrade for customers not yet using our SaaS offering. An example of a quality of life feature built on Thea Core is Thea Notes. This provides a summary of notepad entries for an agreement, which is hugely powerful for many of our customers. Thea Lens provides intelligent document processing functionality. Alfa can already work with third-party IDP solutions, and we're now working on our own functionality in this area, powered by Thea Core. And Thea Connect provides a model context protocol or MCP server. This has not yet been launched as part of our marketing agenda, but it is available, for example, use cases.

And MCP is an emerging standard for connecting AI assistant to business systems, and it's now firmly part of conversations with our customers and with prospects. Thea Connect is likely to be key in allowing customers to plug AI tooling directly into Alfa processes. Moving on from AI, and we've progressed with our key market expansion exercises in fleet, commercial finance and U.S. auto originations. All 3 are progressing with customers, which is our preferred methodology for investment. U.S. auto originations is exciting because of the scale of the opportunity. Every U.S. auto finance provider requires originations functionality, and this is a new addition to our offering. The value is substantial. Fleet is exciting because it opens up the European auto finance market, where auto fleet management often sits alongside retail finance. Our first implementation of our fleet functionality is progressing well. And commercial finance is an adjacent market, which will, in time, increase our TAM, and we're stepping up our marketing efforts within the commercial finance world.

We're also investing in our portal for customer and dealer access, again with customer partnership. And we've completed a pilot accelerating software development using AI tooling. We've had some excellent results. We found many compelling use cases, and we're now moving into a BAU phase. We expect our usage of this exciting tooling to continue to increase the pace at which we can deliver new features for customers.

We continually assess the shape of the team required in order to deliver efficiently for customers. We've seen reduced demand for customer-led enhancement of our software, and we've reshaped the team in response. In the first half, this has resulted in 31 nonvoluntary departures from Alfa, mainly from product engineering. We've continued to recruit where demand is stronger, including into cloud hosting operations and into delivery with both graduate and experienced hire recruitment. We've refreshed our new hire induction material, and we're now rolling this out in all regions. The new approach enables new hires to be onboarded more efficiently and more effectively. And our cross-company program of AI literacy ensures that all areas of the business have the resources that they need to maximize opportunities for efficiency.

For example, every business area has AI champions as points of contact to roll out and adapt learning and development materials for their group. We have a fantastic team and a culture of delivery and of growth, all focused on building this special company together. 2026 people initiatives include our culture playbook, ensuring that we maintain and grow our culture as we scale our team internationally. Our unrivaled track record of delivery continues, and it's this ongoing delivery that layers new subscription revenues on to our model. In the first half, we achieved 2 go-lives for new Alfa Systems 6 customers. The first was for an existing Alfa Systems 4 customer, which upgraded on to Alfa Systems 6. The go-live involved migrating portfolios in 2 different countries onto a single segregated instance of Alfa Cloud. The upgrade allowed our customers to simplify their internal systems infrastructure as well as to access the product benefits of the latest version of Alfa.

The second new customer go-live was for a limited new business pilot, but with a ramp-up in new business volumes expected over the coming months and with migrations of the existing finance book expected to follow, in due course, the result will be our largest Alfa Cloud implementation. So we expect this customer to be an important part of our growth in the coming years.

We've also sold a new subscription upgrade product to our first customer. This is a win for our customer as well as for Alfa. For our customer, access to upgrades on a subscription basis makes costs predictable and upgrades easier to access. For Alfa, the new model increases subscription revenue and assigns to us the benefits of increasing efficiency, and we're confident of further sales of this product in the future. So we have the leading product, an outstanding team and a clear track record of delivery in a complex vertical where competitors frequently fail.

Our market opportunity is huge. Our simplification agenda accelerated by advances in AI tooling will enable us to reach more customers and layer high-value recurring subscription revenue onto our model more efficiently. And investment in our product is expanding our opportunity. So we're really excited about the future. And I'll hand over to Andrew Denton for an update on the prospects for future customers.

Thanks, Matt. I'll continue with the business and the sales update. We're pleased with the progress we've made in the pipeline since our full year results. During the first half, we converted 2 prospects into wins, demonstrating the continued demand for Alfa Systems and the effectiveness of our sales strategy. At the same time, we maintained a strong late-stage pipeline of 9 prospects spanning multiple geographies, customer types and industry segments. Importantly, several opportunities have continued to advance through workshops and contracting activities, and we are already undertaking paid work with some of these prospects.

This remains a key indicator of commitment and provides a strong foundation for future conversions. The pipeline is geographically diverse across the Americas, Europe, the U.K. and broader international markets. We continue to see particular interest in our investments in originations, fleet and commercial finance, reinforcing our belief that expanding the product capabilities increases our addressable and serviceable markets and strengthens Alfa's competitive position. And we've been particularly pleased with the level of incremental sales driven by our new commercial finance modules. So looking forward, demand for asset and automotive finance remains -- software remains strong. What continues to differentiate Alfa is the combination of our people, our product and our delivery track record. These advantages have underpinned our success to date and remain central to our long-term strategy.

Artificial intelligence is creating exciting opportunities across our business. As Matthew explained, we are using AI to accelerate software development, simplify implementations, improve internal efficiency and create practical functionality for our customers within trusted Alfa workflows. We are particularly pleased with the progress of our Thea AI product group. We continue to invest in market expansion through originations, fleet and commercial finance, and we believe these investments will continue to support future growth in both delivery and subscription revenues.

While foreign exchange remains a headwind given the success of our North American business, our expectations for the full year remain unchanged, and we continue to see a significant opportunity ahead of us. So to summarize, the first half of 2026 has seen continued progress across the business. Subscription revenues grew 14%. Subscription TCV increased 22%. ARR grew 17% and net revenue retention remained strong at 110% Subscription revenues now represent 37% of total revenue, demonstrating the ongoing transition of Alfa towards a business with a larger recurring revenue base. Sales performance was encouraging with 2 new wins, growth in total contract value to GBP 247 million and a healthy late-stage pipeline of 9 prospects.

And we continue to see strong interest across the markets we serve and good activity in the earlier stages of our pipeline. We continue to invest in our product, in our people and in delivery capability. Investment in originations, fleet, commercial finance and AI is expanding our addressable market and strengthening our competitive differentiation, while AI is helping us simplify delivery and accelerate development. Most importantly, we remain confident in our future prospects. The combination of a growing subscription base, a strong pipeline, expanding market opportunity and continued product innovation positions Alfa well for the remainder of 2026 and far beyond. Thank you for listening.

[Operator instructions]

Our first question today is coming from Harvey Robinson of Panmure Liberum.

A couple of questions from me at this stage. Just on the pipeline and sales opportunity that you referenced, has there been -- it feels from the trading update to now there's a bit more optimism totally in your descriptions. I mean the pipeline at the half year.

Has there been any sort of material moves within that since the period end? And the second question really is about the Q2 go-live and how that affects the chart that Duncan talked to because you specifically call this auto finance customer as a fairly low key go-live now, but potentially a very large customer going forward. In Duncan's Slide 14, is that in the light orange band? And does that really sort of manifest in there? I'm just trying to work out whether that's hitting those numbers yet in any meaningful way or that's more post '28.

Thanks for those questions, Harvey. I'll pick up the first one and obviously, Duncan on the second one. You're quite right to see the glint in my eye as I talk about sales. And without going too hard on it, we definitely have seen some positive movement in the late-stage pipeline since we drew a line under it for these results. So we're feeling good about it. We've got the that we mentioned that we're doing paid work for. It will be fantastic to get those through to a position where in Alfa's definition of the word sold, they're sold. And we're optimistic that we have the raw material to replace those with hopefully another 3. So yes, well observed. Duncan, are you happy to talk about the Q2 go-live and the effect on your various graphs?

Yes, I'll talk about the graphs I might -- if Matt if you want to color around the go-live and Matt can do that. But yes, it's very much one of the items -- it's part of the 2023 cohort, and you can -- it's one that's a part of go-live. So it's one of the ones that you can see in orange. So yes, you're right. there is a lot of future ramp-up for that at the moment. I think it's worth talking about this client a bit because it helps a little bit with the way that subscription revenues do ramp up within that graph.

So quite often, you'll get hosting revenue first as environments get fired up and people start doing volume testing. When things are not live, we don't get any maintenance payments from those contracts, but we do get some license payments. So a typical structure would be hosting coming on first, then a bit of license as more contract volumes come on to the system. And then at the back end, obviously, once contracts become live, we get the maintenance payments. So there is more to come from that, but we're also -- it is also contributing well in the current year because of the hosting volumes. But Matt, I don't know if there's anything else you want to add.

Yes. Thanks, Duncan, and thanks, Harvey, for the question. It's an exciting customer for us, and I think I talked a little bit about it in the presentation. They're live for a pilot. The pilot means a subset of dealers. So some of their new business is coming on to Alfa.

The next step will be to go live for all dealers. So that mean all new business coming on to Alfa, and they're working towards a migration of the legacy book as well. And that's the point at which the full subscription revenues will hit Duncan's orange chart as you say.

[Operator instructions]

We'll go to Gautam Pillai of Peel Hunt.

My first question is on the NRR bridge and excluding the customer churn you talked about, you're tracking at around 113%, a point up from last year. What is the right level of NRR in steady state? That's my first question. I have a couple more. Second question on the new opportunities you flagged across U.S. auto originations, fleet and commercial finance, which can become financially material first? And what measurable milestones should us use to judge the progress? Is it pipeline additions, implementation revenues or subscription ARR? And finally, one question on AI. You speak about AI expanding Alfa's TAM. -- by reducing implementation effort and onboarding friction. Over the medium term, do you see AI as an efficiency or a margin opportunity? Or is it a sales acceleration opportunity to penetrate customer segments that historically were not available or uneconomical for Alfa?

Thank you very much, Gautam. Nice job in spreading the questions between us. So I'll pick up the new opportunities first. Duncan can pick up the normality of the NRR question. And perhaps, Matthew, you could speak to AI, but I'll probably get excited and chip in.

So on the new opportunities, I think the way that we're characterizing those, Gautam, is, one of them is, which is U.S. originations is an expansion of our serviceable addressable market, whilst we look at fleet and commercial lending as increasing our target addressable market. And so in terms of how they monetize and which monetizes first, they're all seeing different, which is very pleasing because we're sort of covering off every type of go-to-market. So if we start with U.S. originations, that's the increase in serviceable addressable market.

And I think as we've picked up in the presentation and before, the nice thing about that is the go-to-market strategy is really straightforward. All of the success that we've had in contract management system sales within North America all of those people need origination software, and we believe that we will be very well positioned within the competitive dynamic for that part of the market. So essentially, you could see that as almost like a super incremental sale. Fleet, as you know, we have a customer already. It's with one of the -- it's one of the 2 wins that we have announced in the half, a very major logo. And as you know, we really do like doing work and building new software and intellectual property hand-in-hand with a customer.

So a very simple answer to your question is that right now, Fleet is monetizing as we speak. And we've seen that in the increase in revenues for the U.K. part of addressable market within the first half. And finally, without going on too long, commercial lending is a tale of 2 go-to-markets. I pick out in my narrative that we have been delighted with the incremental sales success that we've had with those modules because they're also applicable in our home asset finance market.

It might perhaps take a little bit longer to realize a stand-alone commercial lending sale, although we've noted that within the pipeline, we do have discussions with an organization that perhaps could be that first one. In terms of the milestones and what to look out for, well, you know that these are very important investments for us. So in our disclosures to the market, of course, we will keep you apprised as we have done to date with how we're doing and how that stuff is being monetized within our world. Duncan, NRR?

Yes. Thanks, Andy. We initially started reporting NRR about a year ago. And I think I said back then that the normal level might be sort of around about 108%, but I think I've been proved wrong by that. And without setting heroic targets to Andrew to Duncan to follow up after me. I think your -- the 113% if you strip out the V4 customer, I think in the medium term, it's not a bad figure to be around. If I look back over the NRR that we've tracked internally, if you tracked it since the beginning of 2024, we varied between about sort of 103% and a peak of around about 109% -- but over the last 12 to 18 months, it's very much been trending between 105%, 106% and as high as 115% at one point, not a period end period. So we didn't disclose that.

So -- and I think why would that be? I think that the figures that we've shown an upsell on existing customers of anywhere between 4%, 5%, 6% seems reasonable and then the growth very much from the customers in implementation that we talked about. I think that could accelerate. But I think, yes, 112, 113 round about that with potentially sometimes a little bit higher depending on what's happening. There will be -- offsetting that, there will be a little bit of drag occasionally from -- we still got 24 customers to come off. So there will be a bit of a drag from that at times over the next 24 months. But barring that, I think an underlying 112, 113 million is a sensible number.

Thanks. And on the AI question, you're right. AI is an efficiency and a margin enhancing opportunity because of the internal capabilities that it provides, particularly as we grow. So as we grow as an organization, then we have opportunities to limit the growth of SG&A. But more exciting than that, as you imply, is the opportunity to reach additional customers as we add efficiency into the implementation process for our efforts, but perhaps even more importantly for the efforts for our customers and for system integration partners in implementing Alfa systems. I talked about migrating data from legacy systems to Alpha in the presentation. Other examples include document generation. So there are a lot of documents that need to be produced by the system, generating templates for those is made easier. Even things like building test plans, first level support is also made easier through AI technology. So the opportunity to reduce the friction in the implementation process are many and varied and very exciting for us and open up additional addressable market.

Can I follow up on the system integrators partner point? And in the deck, I saw that partner days remained at around 8% of the total delivery days. Can it scale more than this and faster?

And do you have confidence that the partners can increase implementation capacity without weakening the quality of delivery?

So the 8% that you're looking at in the deck is the amount of effort that we are providing as part of our implementation teams to customers using partner people. In addition, many system integration partners work on the client side, on the customer side within our implementations. So that 8%, which is a number that will vary over time, it isn't in itself representative of the amount of resource that our partners have with skills and expertise in Alfa Systems, and we're seeing that expanding and we're seeing the expansion increasing over time in the number of people who are available from partners to assist with the implementation of Alfa and that in itself increases the capability of the world as a whole to implement Alfa's [indiscernible] and reduces that friction further.

Sorry, just going to pick up on your question about I would characterize as confidence in the quality. You can see partners working in -- well, many ways. We also talk about integration partners who are creating third-party products that we integrate with. But Matthew touched upon in terms of AI capabilities, how we can help with AI, those customers that are doing the systems integration. And we've always worked alongside systems integrators. And you could perhaps describe that as being a slightly more commoditized role than the specialist role that we do in that core alpha delivery.

We are partnering, as you know, with people in that Core Alfa delivery part of our world, and we are being exceptionally careful with choosing who we work with in that respect. We have live conversations about partner accreditation. We're making sure we do that due diligence and a rather extreme example, the Chief Revenue Officer and I visited the main operational center of one of our key partners in Tunisia just to see how they do things and make sure they operate in a way that is consistent with our values and our quality standards. So rest assured, we are being extremely careful with who we partner and being very careful to ensure they have the right quality.

Great. And thank you to Duncan. And I'd just like to congratulate you on the retirement, and thanks for all the time you've given to the analysts and the investor community.

Thanks very much.

[Operator instructions]

We do not appear to have any further questions coming in at this time. Mr. Don, I'd turn the call back over to you for any additional or closing remarks. Thank you.

Thank you, and thank you for your help. I'd like to leave you with 3 main thoughts as we close this session. The first one being that our subscription business continues to build momentum. It's really important with respect to our strategic execution. And with ARR up 17%, contributing 37% of our revenue, subscription TCV up 22% and that net revenue retention that we just discussed of 110%, we are seeing clear evidence of the long-term value creation inherent in our business model and the strategy that Matthew described.

Second, as we've also discussed in the Q&A today, the investments we've made over a number of years in our people, our product and our delivery capability are creating meaningful opportunities. That expansion into originations fleet and commercial finance, together with the work in AI is increasing our addressable market, our serviceable addressable market and our ability to execute at scale. And finally, -- while the wider macro environment remains uncertain, the demand that we are seeing, the strength of our pipeline and our delivery track record gives us continued confidence in Alfa's medium- and long-term prospects.

We've got a great business, a differentiated proposition, an outstanding team and a significant opportunity ahead of us. And speaking of outstanding team, I just want to add my thanks to Duncan as he goes into his victory lap for everything that he's contributed to our business in his time here. So thank you to Duncan, and thank you to everybody listening for your continued support.

Hello, everybody, and welcome to the Alfa Financial Software 2025 Full Year Results. As always, I'm joined by Matthew White, Alfa's COO; and Duncan Magrath, Alfa's CFO. I'll kick us off with the introduction and key highlights before handing over to Duncan for the financial review. Matt will then pick up the operational delivery side of things before I talk about the business and give you a sales update before we summarize. So in overview, 2025 has been an excellent year for the company.

Subscription revenue was up 16%, and we saw an 18% growth in subscription total contract value. ARR of GBP 43.9 million was up 15% and net revenue retention of 109% was up on 2024's 103%. In total, subscription revenues were 34% of our revenue mix. We had a strong sales performance and very strong delivery momentum during the year. The late-stage pipeline was filled with 10 prospects, and we are doing paid work with 5 of the 10 customers in that late-stage pipeline.

We're also seeing encouraging activity in the early-stage pipeline, showing the buoyancy of demand within our target market. 20 customers are now live on Alfa Systems 6, which underscores the ease of implementation of that upgrade for our existing customers. And we continue to invest in people, product and planet. We've grown the team with average headcount up 6% and high staff retention at 97% during the year.

Overall, we invested GBP 37.7 million in our software with the major focus of investment being market expansion. Originations and Fleet are increasing our accessible addressable market and Commercial Finance is increasing our overall addressable market. And for the planet, the carbon offsets we purchased were greater than the total of our emissions. Looking forward, we're confident in our expectations and our prospects.

Matt will touch upon the major talking point of the moment, artificial intelligence. But I'll preempt his messages by saying we see AI as an exciting area. It's an opportunity for us to become more efficient in our internal operations, delivery and in our software engineering, and it brings opportunities to build new functionality and capabilities into our software to create business benefit for our customers.

In light of that confidence, the Board has declared a special dividend of GBP 0.031 and an ordinary dividend has been declared of GBP 0.015. So going into more detail then with the key highlights. Full year revenue was GBP 126.7 million, up 17% on a constant currency basis from last year's GBP 109.9 million. Subscription revenue grew 16%. And as I've mentioned, net revenue retention was 109%.

Total contract value stood at GBP 227.5 million, up 3% on last year's GBP 221.3 million, and operating profit was GBP 40.1 million. That's a 17% increase on last year's number, and it represents a 32% operating profit margin with EBITDA margin at 34%. Cash conversion was stronger than last year at 97%. That's up from 2024's 89%. I will now hand over to Duncan for the financial review.

Thanks, Andy. I said at the half year that the figures really speak for themselves, and I find myself repeating that for the year as a whole. 2025 really was a very strong financial performance. Revenue was up 15% at actual rates or 17% at constant currency with growth across all revenue streams. We had very strong chargeability in the first half, and as expected, this reduced in the second half with less software engineering revenues. Overall, though, it was a good gross margin performance of nearly 64%.

Operating profit grew even more strongly than revenue, up 17% at actual rates to deliver an operating margin of 31.6%. This benefited from 120 basis points from the FX hedges that we put in place to protect ourselves from movements in sterling versus the U.S. dollar. The effective tax rate of 24.9% was in line with last year. And so basic EPS also grew by 17% with diluted EPS up 18%. Overall, a really strong performance.

And given our confidence in the future prospects for the business, the Board has proposed an ordinary dividend of GBP 0.015 per share and declared a special dividend of GBP 0.031 per share. This is a total dividend of GBP 0.046, which is up 21% on the dividends declared and proposed this time last year. Along with a special dividend of GBP 0.05 paid earlier in the year, total dividends are GBP 0.096 for the year, up 20% on last year.

Turning now to TCV. 2024 really was a standout year for our revenue and commercial teams, which was demonstrated by the 34% increase in TCV in that year. We said a year ago that we expected to work through the TCV during 2025. But in fact, we have seen a small increase in the year, ending up 3% higher than this time last year. This increase was driven by the strong growth in subscription TCV that more than offset the reductions in software engineering and delivery TCV.

Next 12 months TCV is up 2%, again, with strong growth in subscription TCV with delivery TCV being in line with last year, but with software engineering TCV down 35% versus this time last year. Despite next 12 months delivery TCV being flat year-on-year, we expect delivery revenues to grow in 2026 and would expect TCV to increase as we convert the customers in the late-stage pipeline into wins.

Given the customer profile in the late-stage pipeline, we do expect software engineering revenues to drop in 2026 from the high of 2025. With the growing importance of subscription revenues to our business, we started publishing some typical SaaS metrics at the last half year's results. On the left, you can see our annual recurring revenue or ARR figures. We calculate this using the average subscription revenues over the last 6 months and then annualize them.

This picture shows what you would expect, very strong growth in ARR, up 15% versus last year and very much in line with our overall growth in subscription revenues. The graph on the right shows our net revenue retention percentage or NRR, and this is a financial metric, which represents the net impact of churn and growth in the subscription revenues.

This is calculated by taking the customers with recurring revenues from 12 months ago and calculating what their revenues are now and expressing this as a percentage. This calculation includes the benefit of upsells and expansions and is net of customer losses. We're often asked by those new to the Alfa story about churn. In reality, closer watchers of our story know that it is in effect 0, and this is demonstrated by an NRR figure that is consistently in excess of 100%.

At 31 December 2025, NRR was an impressive 109%. This was principally due to the ramp-up of subscription revenues from customers in the early stages of their time on Alfa, along with contractual inflation increases. So looking now at overall subscription revenues. It is perhaps worth reiterating that our subscription revenue is dependent on contract counts or in effect, the number of assets on Alfa, i.e., it is volume-based measure and not a per user measure.

Alfa has always priced on this basis as we make companies more efficient and pricing on a per user basis would not be appropriate. We continue to see strong growth in subscription revenues in 2025, up 16% as more customers added more contracts on to Alfa, along with some indexation. Total subscription TCV and next 12 months TCV grew 18% and underpins our confidence that this revenue stream will continue to show strong growth going forward.

Total subscription customers increased from 39 to 42, and we only have 2 customers on v4 who are not yet committed to upgrading onto modern Alfa, and they accounted for circa 7% of revenues in 2025. There are 15 contracted customers not on Alfa Cloud and converting these on to Alfa Cloud is a potential source of future growth in subscription revenues. Turning to software engineering revenues.

Last year, we had a relatively low first half for software engineering revenues and a much stronger second half. This year, we saw the opposite trend with the first half showing a 72% increase in software engineering revenues versus last year, with revenues in the second half down 18% on last year. Overall, this results in revenues up 13% on last year, and this growth was very much driven by enhancement work for new customers. Enhancement work for existing customers was broadly stable.

Perpetual license revenues being the combination of both one-off and customized license revenues totaled GBP 3.7 million in 2025, slightly down on the GBP 4.0 million in 2024 and the GBP 5.1 million in 2023. This will continue to decline over the next few years as the historic perpetual license accounting unwinds. For 2026, at the moment, we see less demand for chargeable enhancements from new customers, and this is what is driving the reduction in TCV.

As noted at the half year, our margins are quite sensitive to the amount of chargeable enhancement work we have as the cost base stays relatively fixed. Turning to our final revenue stream, delivery. The ramp-up of the new projects was the major reason for the 15% increase in our delivery revenues in 2025. We have 11 projects underway where the customer is not yet live and only when these contracts are live, will they drive up our subscription revenues.

Overall delivery TCV is showing us down year-on-year as a result of working through some of the large multiyear projects that we won in 2024. As these multiyear projects continue throughout 2026, the next 12 months TCV is actually flat year-on-year. Given that we are doing paid work for a number of customers in the late-stage pipeline, and we expect these projects to continue, we expect overall delivery revenues in 2026 to be higher than 2025. Turning now to expenses.

Cost of sales grew by 18% over last year, largely on the back of increases in costs from headcount and salary increases, along with a small drop in the amount of capitalization of internally generated software. Hosting costs increased with the growth in Alfa Cloud. Sales, general and admin expenses were up 12%. In addition to salary cost growth, there were increases in profit share due to the higher profits generated this year, share-based payments and increased amortization.

FX has been significant in the period. We had net transaction gains of GBP 0.8 million. Within this, the gain from U.S. dollar FX hedges was GBP 1.5 million, offset by other FX losses of GBP 0.7 million. Other income from R&D expenditure credit was up at GBP 0.4 million. Turning to cash flow. In March last year, I estimated the cash conversion for the year would be 80% to 90% due to accelerated receipts in 2024 from 2 projects. Cash conversion, in fact, has beaten this at 97%.

The reason for this improved performance was again better-than-expected receipts at year-end. So again, I'm guiding to around 80% to 90% cash conversion for 2026 with 90% to 100% thereafter. Dividends paid increased GBP 3.9 million on last year to GBP 26.0 million. Overall, there was a net cash inflow of GBP 5.9 million for a cash balance of GBP 26.4 million at the year-end. Now some words on capital allocation.

Alfa is a highly cash-generative business, and we have a strong track record of returning excess cash to shareholders through dividends. Cumulative dividends paid in the last 5 years are now up to GBP 167 million, and our overall dividend yield from ordinary and special dividends has been running between circa 3.5% to 5% per annum. As you know, we are very disciplined about allocating capital and keep this under review. There are no immediate investment requirements for our current excess cash.

And so we are proposing an ordinary dividend of GBP 0.015 and have declared a special dividend of GBP 0.031 per share, in total, up 21% on this time last year. Next, a brief update on modeling guidance. This slide is largely reiterating guidance I have given as I've gone through my presentation. However, FX is worth highlighting. It is perhaps easier to follow what is going on with FX if you split out the gain or loss on FX hedges from other FX gains and losses.

As far as transaction and translation gains go, our sensitivity remains the same as before with each $0.01 movement in the U.S. dollar impacting revenue by GBP 500,000 and operating profit by GBP 300,000. We had an average rate of $1.32 for 2025. And if we had a rate say of $1.35 for 2026, that would reduce reported revenue by GBP 1.5 million and reported profit by GBP 0.9 million. In addition to this, we had GBP 1.5 million of hedge gains in 2025.

So total profit in 2026 will be lower than 2025 by GBP 2.4 million purely because of FX. Predicting what is likely to happen on the exchange rate is extremely difficult and seems to vary weekly. Earlier in 2026, we hedged 40% of 2026 U.S. dollar cash flows at $1.37. And so if the rate for the year was $1.35, which I used in the illustration I just talked about, we would also have a loss of GBP 0.2 million. So this will be a year-on-year swing in our hedges alone of GBP 1.7 million, and so quite a headwind to profit growth.

However, despite this and assuming the exchange rate does not move far from $1.35, we expect to see good revenue growth in 2026. So a quick recap on what was an extremely strong set of financial results. Revenue of GBP 126.7 million was up 17% at constant currency. This was at an operating margin of 32%, delivering an operating profit of GBP 40.1 million, up 17% on last year.

Diluted EPS was GBP 0.1014, up 18%. Cash conversion was excellent at 97%, resulting in a year-end cash balance of GBP 26.4 million. This cash balance, along with TCV of GBP 227.5 million gives us great strength going forward, allowing us to declare a combined ordinary and special dividend of GBP 0.046, up 21% on last year. I will now hand over to Matt.

Thanks, Duncan, and hello, everyone. Firstly, from me, as always, a reminder of our strategy. The market that we serve is extremely complex, highly regulated, infinitely demanding and ever changing. Our opportunity is huge. We're the leading player in a massive market, and we currently have only a small market share.

So our strategy for creating long-term sustainable business value is designed to maximize and enable us to grasp that opportunity to strengthen, to grow our differentiation by investing in our 3 key differentiators, our smart diverse team, our product and our delivery methodology and tooling to sell, to enable profitable growth by focusing on building our community of single-tenant SaaS customers, increasing our subscription revenue and enabling incremental sales; to scale, to increase our capacity for developing and delivering Alfa Systems and extend our reach; and finally, to simplify to enable more concurrent Alfa Systems implementations more efficiently.

Now as usual, I'll structure this update around our 3 key differentiators: our product, our delivery and our people. And Andrew will talk about exciting sales progress when I finished. But I'll start with a few words on Alfa's product and technology. And firstly, artificial intelligence. Alfa's market positioning, our product architecture and our business model provide strong foundations for long-term growth as the capability of AI technology evolves.

So we view AI as an enabler of greater efficiency and greater customer value. We're excited about the possibilities, and our approach is deliberately pragmatic and grounded in real use cases that enhance productivity, delivery efficiency and product capability.

We focus our AI strategy on 4 areas: AI literacy across the organization, ensuring that all of our people can effectively and responsibly leverage new tools; internal efficiencies using AI to streamline processes, to reduce manual effort and to improve operational scalability, including in software development.

Delivery acceleration, applying AI to reduce implementation costs and time lines for customers, for example, through AskThea, our AI chatbot, which is in use by our delivery teams, by our customers and by our partners; and product enhancements, embedding AI within Alfa Systems where it solves customer challenges and improves automation, insight and decision support.

Expanding a little on the product enhancement's theme. In 2026, we'll invest in architecture to simplify the process for expanding the use of AI by Alfa Systems customers in a secure and resilient way. Our vision is for our customers to be able to solve problems using AI, both in Alfa Systems itself and with Alfa Systems as part of a wider landscape.

We'll continue to invest in demonstrable and productionized functionality, for example, multifunction self-service agents and intelligent document processing to automate credit workflow. The capability of technology in this area is moving forward fast, and we are leveraging that progress. Now some of you may be relatively new to our story and may not be familiar with some of the intricacies of the market that we serve. So it's worthwhile repeating.

And I'll do so while adding context around our view of the future of AI in our market. We are, of course, aware that many views have been expressed in the wider area recently. This is our take on the implications for Alfa. Firstly, deep functional domain capability makes simple replication of Alfa Systems by AI impossible. Put simply, you can't vibe code an Alfa.

To the extent that development of software will become easier in the future, we have a huge head start and the resources to capitalize on our position. And we see ourselves accelerating away from competition and potential future competition as development costs reduce.

Secondly, whilst we do see generic AI automation tooling enhancing our ability to serve our customers, this will only be possible because those automation tools will be predicated on and governed by our enterprise software. Alfa provides a vast, well-structured data framework that is based on a deep understanding of the complex enterprise context in which we operate.

Our deeply embedded enterprise-wide software provides encoded institutional knowledge and system of record. Alfa Systems serves customers' line of business in an extremely complex market. And our regulated customer base requires embedded deterministic workflow and ledger transactions with clear audit trails and predictable interactions within a complex landscape. Probabilistic outcomes have no place, and this absolutely does not favor ungoverned AI outputs acting alone.

In this context, standardization, compliance, reliability, reversibility, integration, speed, authority models, security and specific industry practice matter much more than generic automation. And finally, software needs to be implemented. Enterprise software implementation projects within highly complex and regulated environments are necessarily huge business change exercises. We see AI increasing implementation efficiency, but we don't see it eliminating the implementation process.

At Alfa, we have an unrivaled track record of delivery of these projects in intricate and interconnected contexts and where competitors consistently struggle. And this is a key aspect of our differentiation. We should also be clear that Alfa Systems is priced based on the number of asset finance contracts managed on Alfa rather than per user, and this will ensure that AI-driven headcount reductions at customers will not impact Alfa's revenues.

So while we do see opportunities for Alfa Systems as an enabler for Agentic technology that reduces system user numbers, this also represents an opportunity rather than a threat to our revenue. In summary, Alfa's market-leading technology stack and architecture, the scale and complexity of our software, our expansive and culturally embedded innovation and investment agenda and our robust revenue model ensure that Alfa is positioned to maximize the potential of AI technology as it evolves.

Turning to other areas in which our product, Alfa Systems has progressed. 2025 was a landmark year. In all of our key product development areas, we have worked in partnership with customers. This is our preferred way to develop software because it ensures market fit and because our customers co-invest sharing the cost. Our product investment keeps us ahead, wins new customers and also plays a part in ensuring that we don't lose customers.

2025 was a landmark year because we have developed MSPs or minimum sellable products in our 3 key expansion markets, 2 of which expand the scope of our existing serviceable addressable market or SAM, U.S. auto Originations and Fleet, and the third of which takes us into a new target addressable market, Commercial Finance. U.S. auto Originations is exciting because of the scale of the opportunity. To date, our U.S. auto implementations have provided lease and loan servicing functionality.

But all U.S. auto finance providers require an origination system in addition, and we believe that this market is underserved. We see the value of a U.S. auto Originations implementation as between one-third and two-thirds of the value of our core servicing market, so a huge opportunity. We have already sold our origination solution to one large customer and the development that we've carried out to date has benefited hugely from partnering with that customer.

Implementation of Alfa for Originations will follow from our servicing implementation. Fleet is exciting because it opens up the European auto finance market where auto Fleet management often sits alongside retail finance. We've already secured an initial sale in this market too, and the implementation is progressing well. And Commercial Finance is an adjacent market, which will, in time, increase our TAM. We've secured 2 sales within customers that are primarily focused on asset finance.

And in 2026, we'll be stepping up our marketing efforts within the Commercial Finance world itself. I've outlined some highlights here, but it's by no means an exhaustive list. Our product improves constantly, and we release a new version every 4 weeks. Every version includes many new features and functionality. 2025 saw us increase our investment in our product again, and 2026 will see the exciting product progress continue at pace.

I've spent a lot of time talking about technology today, but our delivery track record and our people remain just as important in differentiating Alfa from competitors. If I had to cite a single differentiator, it would have to be culture. We have a culture of delivery. And it's really hard to deliver in this market. We succeed where competitors frequently fail. We achieved 35 successful deliveries in 2026, and 20 customers are now live on the latest version of our software, Alfa Systems 6.

In 2025, we started work with some smaller opportunities in the U.S., which is important because it has enabled us better to understand the requirements of lower-tier customers and to develop our Alfa Start solutions with the aim of creating a product for this market, including for partner-led delivery. We have a culture of growth individually and collectively.

We put a lot into ensuring that we can attract the best people in our industries into developing our team and to engaging and retaining our team as we grow together. We've continued to grow our team with average headcount over the year of 516. We have strong retention at 97%, and we have strong engagement at 83%. Following the success of our Lisbon Smart Hub, we've set up a new Smart hub in Gdansk, and we've welcomed new software developers and new members of our cloud hosting team.

2026 will see us set up a 24/7 hosting operations team in Gdansk. We've refreshed our talent management and pay and promotions process, moving away from heavyweight annual review towards a clear framework for ongoing conversations about skills development, goals, delivery and well-being. And really importantly, we have a culture of inclusion and of social and environmental responsibility.

And you can read more about this fundamental part of who we are in our 2025 sustainability report, which we released last week. We're in a fantastic position now, and we're excited about the future. Our culture remains key to that. So we're extremely grateful to our team for making possible the success that we're reporting today as we grow this special company together. And we're also continuing to welcome new customers into our community, as Andrew will outline next.

Thanks, Matt, and I'll continue with the business and the sales update. The sales pipeline has been really strong during the year. The late-stage pipeline increased to 10 prospects. And to add a little detail to that, touching on the early-stage pipeline, we've been focusing particularly on gathering industry knowledge and contacts in Commercial Finance. We've also seen strong interest in Originations and Fleet with multiple demos and overall, the activity in the early-stage pipeline has remained robust.

We've been delighted by the interest in the results of the investment work that we've been doing, which really underscores our decision to build out the software in those areas. Touching then on the late-stage pipeline. During FY '25, we added 5 new prospects, converted one into a win, one moved back to the mid-stage, and one was lost. Overall, we ended the year with 10 prospects in the late-stage pipeline, which was up from 8 at the last year-end.

And as I mentioned at the start of the presentation, we're doing paid work with 5 of them. We are a preferred supplier with 8, which gives us a huge amount of optimism that we will convert those too sold in due course. It's also worth noting that we've seen good spread across our regions with recent additions in Europe as well as our first South American prospect for in-country operations. Turning then to the outlook.

Demand for asset and automotive finance software remain robust as our pipeline demonstrates. Our people and delivery record, as always, are key differentiators. That's the case now, and we expect it to continue to be the case in the future. We've been working hard as before to simplify our implementations, but we're increasing the use of AI and growing our capability to do more implementations as a result of this work.

We expect further growth in delivery revenues, which will feed through into more subscription revenues in 2026 and beyond. We continue to invest in our product. Chargeable development work will vary depending on the mix of new customers in our pipeline. For 2026, we expect this to be below the high watermark achieved in 2025. And our success in growing our U.S. business means that we're impacted by foreign currency exchange, which right now is a headwind.

But in summary, we expect that 2026 will be a year of continued growth and momentum. So to summarize what you've been hearing today so far. 2025 has been a fabulous growth story for our single-tenant volume-based SaaS solution. Subscription revenue has grown 16%. We've seen 18% growth in subscription TCV. ARR was up 15% to GBP 43.9 million and NRR was at 109%, up significantly from 2024's 103%. Overall, subscription revenues have contributed 34% of the total.

I've talked about the strong sales and delivery momentum, a strong late-stage pipeline with 10 prospects in total, up from 8 last term. And we're working under LOE or equivalent with 5 of the 10 customers in the late-stage pipeline. We're seeing encouraging activity in the early-stage pipeline, and that activity is very much validating the software investment that we've been making in growing our addressable market.

20 customers in total are live on Alfa Systems 6, a really pleasing level of uptake that, as I said before, really underlines everything that we've said about this latest game-changing version of our software being frictionless for existing customers. We continue to invest in people, product and planet. Headcount is up 6% with high staff retention at 97%. And the investment that we've made in our key software asset was GBP 37.7 million.

That investment focused on Originations, Fleet, Commercial Finance to drive us forward and to expand our opportunity. And carbon offsets purchased were greater than 100% of our emissions. So we're confident in our expectations and in our prospects. The Board has decided to declare a special dividend of 3.1p and an ordinary dividend of 1.5p, and we continue forward with that confident outlook. Thank you for listening.

Thank you for the presentation. We have had a number of questions pre-submitted and submitted live. [Operator Instructions] Our first question is, results look solid this year, but is this the sort of growth we should realistically expect going forward? Or was this a particularly good year?

Thanks, Ivy, and welcome, everybody. That sounds like well for you, Duncan.

Thanks, Andy. Yes, they were really, really pleased, very good set of results for 2025. Revenue growth of 15% at actual rate, 17% constant currency was very strong. We very much see ourselves as there's a phrase in the technology sector, Rule of 40. So we very much see ourselves as a sort of 30% margin type business with a sort of 10% to 12% on average revenue growth business.

And we've -- over the last 5 years, we've averaged 11% growth per annum, and that we think is a sort of sensible long-term growth trajectory. So we don't expect to repeat the 15% growth next year, but we certainly still see growth next year, and we still see us over the medium term, delivering that sort of compound growth rate that we've been talking about.

Thank you, Duncan. Next, we have, do you expect recurring revenues to become a larger proportion of total revenue in the future? And I'm also going to ask the next question as well as it's relating. So we also have congrats on the excellent set of results. Subscription and delivery revenues have accounted for 34% and 50% of revenues, respectively, in both FY '24 and FY '25 with delivery. With expectations of a reduction in software engineering revs in FY '26, what may -- sorry, what may we anticipate the percentage split for each of the segment in FY '26?

That sounds like Duncan again.

Okay. Yes. Yes, great question. Subscription revenue is the fastest-growing revenue stream we have, and the strategy is to drive forward the growth in our subscription revenues. And we will see that progress further in 2026. So we -- as you say, we basically have roughly 50% delivery revenues, 34% subscription revenues and software revenues with the balance.

We see subscription revenue percentage growing in 2026, so getting up towards 40% probably. Delivery revenues probably staying around about the 50% level and with software coming down to more like the 10% level. So yes, we expect to see a step forward in subscription as a proportion of the business in line with our strategy.

Thank you, Duncan. Our next question is, are you seeing more demand from banks, leasing companies or auto finance groups at the moment?

I'll pick that one up. It's another great question. And perhaps I take the liberty of slightly repurposing the question and substituting OEMs or manufacturers for auto because that is the mainstay of our market, large financial institutions like banks and people who make assets.

And actually, a quick skim of our late-stage pipeline, which we talked about during the presentation shows that we're not 1 million miles away from half and half between banks and manufacturers. I think perhaps it's helpful to give more of a voiceover of the question, though, and guessing a little bit why it's been asked. Diversity within our world is good.

That's diversity of countries, asset classes and different end markets because having a broad market base builds resilience into our business and gives us, frankly, the opportunity to make more sales in more places. It's not a dissimilar idea to reducing customer concentration, which is another thing that we've worked on in the service of resiliency. So diversity of the sources of our business is super important, but the direct answer is roughly half and half. So all of our markets are active.

Thanks, Andy. And are you seeing more -- sorry, the question was just removed then. The balance sheet is very strong with no debt. What's the long-term plan for all of that cash?

Maybe I'll have another go at that one, even though it involves numbers, but it gives Duncan something of a break. It might be useful to tell the listeners what investment means to us so that you can get a better feel for our aspirations and why we treat cash the way that we do. Most of the things that we can do meaningfully to invest our business; the vast majority of those things take the form of opportunity cost.

So when we are building software, for instance, in 3 areas that we have made investments on in 2025, we're choosing not to sell those days, and it will be the same where we're making investment in delivery efficiency. So in terms of our aspirations and what we want to achieve in the future, that's not really about cash. That's about making decisions with the resources that we've got.

We do like the optionality because something might come along that requires us to spend some cash. But in general, we don't. And therefore, we take the view that the money belongs to investors, we make sure that we've got enough money, but anything that we don't need, we will return it to you, and that's what you've seen in the last few years.

Thank you. Our next question is, where do you see Alfa in 5 years' time? Bigger geographically, more products or mainly deeper with existing clients?

Matt, could I put you on the spot for that one? That is a product that has a bit of a sense of our purpose in terms of scaling the business and having greater impact.

The Alfa in 5 years' time point? Yes. So do we see Alfa bigger geographically? Quite possibly, yes, although I'll return to that. Do we see Alfa having more products? Absolutely. Do we see Alfa being deeper within existing customers? Yes, absolutely as well. So I'll return to all 3. So bigger geographically, it's really important to emphasize that the existing target markets in which we're working are huge for us and have a huge amount of potential.

And we absolutely see our existing target markets sustaining our growth for the medium to long term. But we do see ourselves expanding geographically. Where that tends to happen is with existing customers. So existing customers really like the product, really like the way that we work with them.

We work in really close partnership with our customers, and they'll often take us into new geographies and where those are interesting geographies for us as potential target markets, then we can expand our interest, and that's one important way in which we've grown in the past, and we'll continue to do that in the future. Will we have more products?

Yes, we've talked a lot about our Commercial Finance entry, and we've talked a lot about Fleet and Originations. Fleet and Originations are -- expand the asset finance market for us. Commercial Finance is -- it's an adjacent but it's additional target addressable market. And that is something that could power our growth for the even longer than long term. we're thinking early about that expansion into the wider lending market, and we're making good progress already.

So it was -- sorry, the question has gone. So it's geography, product, and deeper within existing customers or similar reasons, yes, absolutely. So partly -- and we're seeing that already on the Commercial Finance market, we're able to expand the products that we're helping our customers to support.

We're also able to help our customers to grow, of course. And our ongoing product investment, either internal investment or with our customers, expands our module set as well. And one area in which we've been getting better over the last few years is incremental sales, so selling those additional modules into existing customers. So yes, in all 3 in various ways.

Thank you, Matt. Next, we have, you often talk about a strong pipeline. How much of that pipeline is realistically signable in the next 12 months rather than just nice conversations?

Well, we certainly enjoy nice conversations with prospects, but the question is absolutely right that this is all about getting some tangibility on it. We often talk about different types of selling and what it means actually to close a deal. So important, I think, for everybody on the call to know that when we mark something as being sold, that's because we've got a complete set of contracts for it.

And -- the contractual process, the process of negotiating those legal contracts can go on a little bit. That's because it's really important for us. We are very, very careful with the types of contractual terms we'll sign up to. It's also, of course, really important for the customers because these are very long-lived systems, and therefore, the contractual terms is something that the customer has to live with, too. So that's our strict definition of when it's sold.

But if we think of the 10 that we have in the late-stage pipeline, which is right on the edge of being sold, 8 of them have said that we're a preferred supplier. That means that they would rather work with us. So it's not sold in the form of having a complete contract set, but it's definitely a good sign and we'd be pretty confident of bringing those 8 over the line. I won't say whether it's 12 months or not, but I would say fairly shortly.

The other thing that is worth noting is that within those 10, 5 of them have done paid work with us. So whilst we don't have that full contract set, customers very often want to get on with it and actually start the processes of associated with implementing their very own Alfa. So those 5, if the definition is chosen you and starting to give you money, then they feel quite sold as well. But the succinct answer is 8 of them preferred supplier, we'd be pretty confident of bringing those 8 across, but there is little way to go.

Thank you, Andy. Our next question is, do customers ever try to build systems internally instead of buying Alfa? And how often does that actually work out for them?

That's a fab question, and Matthew and I have both seen some fallout from that kind of thing in the past. With customers building their own systems, I will deliberately talk about it as core systems because there's a bit of a sting in the tail coming. There was a book that doesn't seem to be that long ago because I'm pretty old, actually was probably quite a long time ago called In Search of Excellence, where some American business academics talked about sticking to the knitting and the importance of sticking to the knitting.

And largely, mature companies have got a very focused strategy. So an OEM -- an auto OEM knows that its job really is building cars, and everything directly associated with that. There's software in their house, of course, but they're not authors of large pieces of software like us. It feels quite compelling, can feel quite compelling to start with. It would -- the idea of a bespoke system would definitely fit their current situation like a glove.

But of course, they'd have to execute it right. We've been building our piece of software for 35 years now. So we've had plenty of time to get it right. And you do go down wrong path sometimes, and we've had the experience and the opportunity to correct that. The other thing about fitting like a glove today is it only fits like a glove today. And I think everybody on the call is probably watching the news and has been watching the news.

There's a lot going on. And really who knows what the future will bring in our world, what requirements the future brings. So you're definitely not going to be all that future-proof, whereas across all of those areas of expansion that Matt mentioned and diversity that I talked about, our single product strategy gives the best opportunity to be future-proof.

So the 2 problems with doing that is that you've got to execute well, you've got to have the capability to execute well and you've got to be able to guess what the future holds, which is really difficult, which is why you don't often see it and where Matt and I have seen it, it's not worked out all that brilliantly. I do think that it's worth a note on moving away from core systems on this idea of ecosystems.

It's important that we allow our customers the latitude to configure Alfa in order to make it do the things that they want to do, but also through our take on ecosystem through our APIs and our integration layer, give them the opportunity to integrate point solutions in things that they might need, things that they might want to avail themselves of and actually some things that they might develop themselves.

A good example there would be a highly branded point-of-sale system so that they can have a better view over the customer experience and customer journey. So our view on Alfa these days is that it is giving the customer the best of both worlds. But the direct answer to that question is not that often these days, and it doesn't usually work out.

Next, we have a couple of questions on AI. The first one being, how is Alfa thinking about incorporating AI into the Alfa platform and are clients starting to ask for AI-driven capabilities? And the second one is, are customers asking for AI features yet? Or is the demand still mostly focused on core platform functionality?

Well, all of our AI initiatives are in Matthew's part of the business. So would you like to answer that one, Matt?

No problem. I was expecting this one, so I won't need remind me of the question halfway through. We've had -- and we've had for a long time, actually various features in our workflow, which you might consider AI. So the simplest decisioning in Alfa's workflow capability doesn't need an LLM but might be considered AI.

We've got machine learning capability within our credit decisioning functionality that, again, is AI related, not necessarily LLM related, but it is AI. AskThea is our chatbot for assisting us in our implementations of Alfa and our customers and their use of Alfa Systems and our partners as well in implementation of Alfa Systems that is LLM-based. And we have, in addition, various demos and proof of concepts for LLM or agentic or intelligent documentation production and processing integration.

The models that we're working with are getting better all the time. They've come a long way actually in the last year or so. We're hoping that we'll get to a point where interaction with Alfa to enable decisioning and workflow might be able to be configured using natural language only. That will be dependent on the progression within the models themselves.

Importantly, current investments, investment that we're working on at the moment, we'll see Alfa, the SaaS product, so the SaaS version of Alfa, which is the only version that we sell now, coming with AI tools, pre-configured as part of the deployment, enabling our developers to use these via API. So that's what I was talking about when I referred to architecture to simplify the process for expanding the use of AI by Alfa Systems customers in a secure and importantly, in a resilient way.

The second part of the questioning there was around the customers' demand. It's important to be clear that customers mainly need features. Alfa is a hugely functional system. The depth and breadth of functionality within Alfa is extreme, the extent is very, very large, very large, let's put it that way. Whether we deliver those features using AI is mainly irrelevant to our customers.

I say mainly irrelevant, sometimes we'll have conversations with CTOs along the lines of, please give me something that I can show to -- show internally that shows that I'm making use of AI, and we're able to satisfy that as well, of course. But generally, whether or not we're using AI is irrelevant. Worth noting, though, that it's great when we can show customers the art of the possible. So we can say to a customer, we have this functionality that enables the upload of a contract into the system.

It will then kick off credit decisioning and result in a process that ends up with a live contract. That is extremely exciting for our customers. And while we are often led by our customers' requirements and yes, the core functionality is still the core functionality, we are also able to show customers and lead where we're able to provide functionality that people haven't thought of.

Thank you. Our next question is, how easy would it be for a customer to switch away from Alfa once they've implemented your platform?

Really hard, but you probably want a little bit more than that. I often talk about trying to sustain a contradictory investment case. So we talk about Alfa being really sticky and hard to move away from and yet we make new sales. We talk about push and pull factors. Push factors lead people to buy a new piece of software.

And the reason we do that is it usually takes quite a big thing or quite a big emission to get people to want to change their software at all. So a push factor might be a regulatory change, or their current system is running out of support or represents a cyber risk or something similar. These are very, very big projects and big business transformations.

I mean Matt correctly points out when he answers the often posed right now AI question about delivery and business transformation being such an important part of what we do. So it's hard. These are heart and lungs systems that support the businesses in just about every way.

The job for us to make sure that we continue in a way that means that our customers don't even consider that is to continue to do a great job, continue to invest in our software, make hay while the sun shines to keep it moving forward. Give our customers that art of the possible capabilities that they couldn't even conceive of but help them out in there every day.

And of course, make sure that from a regulatory, cyber, data resiliency and technologically effective way that we continue to be the system that they need and make sure that they don't even think about taking the plunge. But if they did take the plunge, it would be a very, very big thing for them to do, which is why enterprise software is naturally quite sticky.

Thank you, Andy. Our next question is, how much visibility do you typically have on revenues for the following year?

That feels like the CFO to me.

Thanks, Andy. Yes, I think it's probably worth -- if you get to the back of our slide deck, which is available on our website, you'll see that we -- each time we release our results, we have a little table in there about revenue of recurring nature, which basically talks about how much of our revenue each year is coming from existing customers, how much is coming from new customers. And that can vary for 2025, 70% of our revenue is from existing customers, which is lower than the previous year, which was 79%.

So 70% to 80% of our revenues are generally from existing customers. So it's really that the visibility is around the balance. Visibility is the right word because -- as opposed to contracted. So we also have TCV, which gives a flavor for what we've contracted. And if you look at the next 12 months figures, in some cases, that can look quite low. But for instance, often people will only issue us statements of work in 3-month batches even though we know the project is going to last for a year.

At a very, very high level, visibility at the start of the year is pretty good. We've got a pretty good idea of where all of the revenue is going to come from by customer. There might be a small amount that we're starting the year thinking we don't actually have a name customer for that, that we need to go and find, but that's probably less than 5%.

Of course, the revenue that actually ends up at the end of the year is never exactly what we thought at the start of the year because some projects go bigger, some projects go shorter, some projects don't quite start as quickly as we expect, et cetera. So it is a bit of a moving piece. But if we just give a one number answer, I would say visibility is sort of 95%, something like that.

Thank you, Duncan. I'm going to move on to our final questions now. If you do have any further questions, please e-mail the team who will respond to any questions that weren't covered this afternoon. So our next questions are about future outlook. Which regions of the world offer the biggest growth opportunities for Alfa?

And looking ahead a few years, what do you think will be the biggest driver of growth for Alfa? And the final one is, if things go the way that you might hope, what do you think might be the revenue split between Asset, Commercial and Fleet in the medium term?

I'm writing those down, so I don't get halfway through a great answer and forget. Okay, let's -- I'll have a bit of a go, but I'm sure the others might weigh in on that final question. In terms of market opportunity, what do you need for growth? Matt picked up when he was speaking about the idea that Alfa actually tries to remain very focused.

I get -- in my investment portfolio, I like companies that have clearly articulated and focused strategies. It would be very easy for an organization like ours with a lot of opportunity to fall into what I would call strategic dissonance, and you just got a lot of things competing for your attention. So we do try to be focused. And we focus very much on the European and U.S. markets, and we focus on auto and equipment.

And together, those 2x2, 2x2 matrix of Auto and Equipment, Europe and the U.S., they make up roughly two-thirds of the global spend on asset finance, technology and services, which is about GBP 3.5 billion. So that's a GBP 2 billion opportunity. He said making the math a little bit easier. And if one thing that you need is runway, well, then there's runway there very much because you've got GBP 130 million and a big company that it's a market leader.

And in terms of our focus markets, there's a couple of billion to go after. What else do you need? Well you need a competitive edge in those markets, and you need drivers for change in those markets. And we see that across all of them. So absolutely, the things that will -- the areas where we will be seeing a lot of growth are in those markets. Again, we have talked today across all of us about the plays that we're making in expanding our serviceable addressable market and our target addressable market.

And in particular, thinking back to Matthew's words in the presentation replay, then if you add Commercial lending, then you're increasing the addressable market even more. Why would we spend all of that money on increasing our addressable market and indeed our serviceable addressable market when we've got so much runway is that it is absolutely our intention to eat up a lot of that target addressable market in the coming years. And we think it's important we think about making it bigger now.

Plus if you're going at more market, then you're able essentially to buy more, more lottery tickets give yourself more of a chance of a win in terms of the sales process. In terms of the growth driver, again, if you'll forgive me, I'll slightly re-purpose the question and talk about operational gearing. If you think about parts of our business, and we spoke about the revenue mix earlier, there are some parts of our business that involve essentially reselling people. We take somebody and then we charge for their time.

That's the professional services model. If you look at the subscription parts of our business, then you've got operational leverage in there and some big chunks of that have nothing to do with people's direct time or they're not related in such a direct way to people's time. So all of our revenue segments are good. We make good money in all of our revenue segments.

But essentially, I'm answering the question by saying our strategy to grow the repeatable annual revenue in our business in the form of subscription revenue in the form of SaaS-based revenues will be over the longer term, the absolute growth driver of our revenues because we can build those revenues independently of the speed at which we build our workforce, and therefore, we can make a greater margin.

The final one was about what the split looks like going forward. So I've been doing these 30 years. And over those 30 years, in general, you've got equal demand across all of those parts of the market. So if we bring it back to the fact that we focus on equipment and auto in the U.S. and in Europe, if I were to take the clock forward, then I would see fairly -- over the longer term, you'd see fairly even demand across all those market segments.

I think the thing that might be interesting is that we are definitely -- and Matt mentioned this as we talked about growth. We will definitely continue to increase our geographical growth, and I certainly wouldn't bet against if you wind the clock forward, Asia-Pac in some way becoming part of our target market. And that will absolutely be net new revenue from countries where we've not had opportunity before.

And of course, the thing that we do keep coming back to, which is Commercial lending, which is a whole new market for us with a whole new go-to-market strategy. So going forward, it's those 2 things that would affect the balance. But normally, one would expect to have fairly even demand from all of those markets because all of those markets are subject to push factors, as I discussed before.

Thank you, Andy. That's all the questions that we have for today. So I'll hand back over to the management team for any closing remarks.

Thank you, Ivy, and thank you for your support in this. I would just like to thank everybody on here for genuinely a very insightful set of questions, which we've enjoyed answering and talking about. You're clearly people who do pay very close attention to our story and what we're doing, and we hope that you'll continue to. But everybody's got things to do and everybody is busy, and it is a weekday. So we really do appreciate you giving us a little bit of your time to hear from us and hopefully speak to all of you this time next year.

Thank you to the management team for joining us today. That concludes the Alfa investor presentation. Please take a moment to complete a short survey following the event. A recording of this presentation will be made available on Engage Investor. I hope you enjoyed today's webinar.

Hello, everybody, and welcome to the Alfa Financial Software 2025 Full Year Results. As always, I'm joined by Matthew White, Alfa's COO; and Duncan Magrath, Alfa's CFO. I'll kick us off with the introduction and key highlights before handing over to Duncan for the financial review. Matt will then pick up the operational delivery side of things before I talk about the business and give you a sales update before we summarize.

So, in overview, 2025 has been an excellent year for the company. Subscription revenue was up 16%, and we saw an 18% growth in subscription total contract value. ARR of GBP 43.9 million, was up 15% and net revenue retention of 109%, was up on 2024's 103%. In total, subscription revenues were 34% of our revenue mix. We had a strong sales performance and very strong delivery momentum during the year. The late-stage pipeline was filled with 10 prospects, and we are doing paid work with 5 of the 10 customers in that late-stage pipeline.

We're also seeing encouraging activity in the early-stage pipeline, showing the buoyancy of demand within our target market. 20 customers are now live on Alfa Systems 6, which underscores the ease of implementation of that upgrade for our existing customers. And we continue to invest in people, product and planet. We've grown the team with average headcount up 6% and high staff retention at 97% during the year. Overall, we invested GBP 37.7 million in our software with the major focus of investment being market expansion. Originations and fleet are increasing our accessible addressable market and commercial finance is increasing our overall addressable market.

And for the planet, the carbon offsets we purchased were greater than the total of our emissions. Looking forward, we're confident in our expectations and our prospects. Matt will touch upon the major talking point of the moment, artificial intelligence. But I'll preempt his messages by saying we see AI as an exciting area. It's an opportunity for us to become more efficient in our internal operations, delivery and in our software engineering, and it brings opportunities to build new functionality and capabilities into our software to create business benefit for our customers. In light of that confidence, the Board has declared a special dividend of 3.1p and an ordinary dividend has been declared of 1.5p.

So going into more detail then with the key highlights. Full year revenue was GBP 126.7 million, up 17% on a constant currency basis from last year's GBP 109.9 million. Subscription revenue grew 16%. And as I've mentioned, net revenue retention was 109%. Total contract value stood at GBP 227.5 million, up 3% on last year's GBP 221.3 million, and operating profit was GBP 40.1 million. That's a 17% increase on last year's number, and it represents a 32% operating profit margin with EBITDA margin at 34%. Cash conversion was stronger than last year at 97%. That's up from 2024's 89%.

I will now hand over to Duncan for the financial review.

Thanks, Andy. I said at the half year that the figures really speak for themselves, and I find myself repeating that for the year as a whole. 2025 really was a very strong financial performance. Revenue was up 15% at actual rates or 17% at constant currency with growth across all revenue streams. We had very strong chargeability in the first half, and as expected, this reduced in the second half with less software engineering revenues. Overall, though, it was a good gross margin performance of nearly 64%.

Operating profit grew even more strongly than revenue, up 17% at actual rates to deliver an operating margin of 31.6%. This benefited from 120 basis points from the FX hedges that we put in place to protect ourselves from movements in sterling versus the U.S. dollar. The effective tax rate of 24.9% was in line with last year. And so basic EPS also grew by 17% with diluted EPS up 18%. Overall, a really strong performance. And given our confidence in the future prospects for the business, the Board has proposed an ordinary dividend of 1.5p per share and declared a special dividend of 3.1p per share.

This is a total dividend of 4.6p, which is up 21% on the dividends declared and proposed this time last year. Along with a special dividend of 5.0p paid earlier in the year, total dividends are 9.6p for the year, up 20% on last year. Turning now to TCV. 2024 really was a standout year for our revenue and commercial teams, which was demonstrated by the 34% increase in TCV in that year. We said a year ago that we expected to work through the TCV during 2025. But in fact, we have seen a small increase in the year, ending up 3% higher than this time last year. This increase was driven by the strong growth in subscription TCV that more than offset the reductions in software engineering and delivery TCV.

Next 12 months TCV is up 2%, again, with strong growth in subscription TCV, with delivery TCV being in line with last year, but with Software Engineering TCV down 35% versus this time last year. Despite next 12 months delivery TCV being flat year-on-year, we expect delivery revenues to grow in 2026 and would expect TCV to increase as we convert the customers in the late-stage pipeline into wins. Given the customer profile in the late-stage pipeline, we do expect software engineering revenues to drop in 2026 from the high of 2025. With the growing importance of subscription revenues to our business, we started publishing some typical SaaS metrics at the last half year results.

On the left, you can see our annual recurring revenue or ARR figures. We calculate this using the average subscription revenues over the last 6 months and then annualize them. This picture shows what you would expect, very strong growth in ARR, up 15% versus last year and very much in line with our overall growth in subscription revenues. The graph on the right shows our net revenue retention percentage or NRR, and this is a financial metric, which represents the net impact of churn and growth in the subscription revenues. This is calculated by taking the customers with recurring revenues from 12 months ago and calculating what their revenues are now and expressing this as a percentage.

This calculation includes the benefit of upsells and expansions and is net of customer losses. We are often asked by those new to the Alfa story about churn. In reality, closer watchers of our story know that it is in effect 0, and this is demonstrated by an NRR figure that is consistently in excess of 100%. At 31 December 2025, NRR was an impressive 109%. This was principally due to the ramp-up of subscription revenues from customers in the early stages of their time on Alfa, along with contractual inflation increases.

So looking now at overall subscription revenues. It is perhaps worth reiterating that our subscription revenue is dependent on contract counts or in effect, the number of assets on Alfa, i.e., it is volume-based measure and not a per user measure. Alfa has always priced on this basis as we make companies more efficient and pricing on a per user basis would not be appropriate. We continue to see strong growth in subscription revenues in 2025, up 16% as more customers added more contracts on to Alfa, along with some indexation.

Total subscription TCV and next 12 months TCV grew 18% and underpins our confidence that this revenue stream will continue to show strong growth going forward. Total subscription customers increased from 39 to 42, and we only have 2 customers on v4 who are not yet committed to upgrading onto modern Alfa, and they accounted for circa 7% of revenues in 2025. There are 15 contracted customers not on Alfa Cloud and converting these on to Alfa Cloud is a potential source of future growth in subscription revenues.

Turning to software engineering revenues. Last year, we had a relatively low first half for software engineering revenues and a much stronger second half. This year, we saw the opposite trend with the first half showing a 72% increase in software engineering revenues versus last year, with revenues in the second half down 18% on last year. Overall, this results in revenues up 13% on last year, and this growth was very much driven by enhancement work for new customers. Enhancement work for existing customers was broadly stable.

Perpetual license revenues being the combination of both one-off and customized license revenues totaled GBP 3.7 million in 2025, slightly down on the GBP 4.0 million in 2024 and the GBP 5.1 million in 2023. This will continue to decline over the next few years as the historic perpetual license accounting unwinds. For 2026, at the moment, we see less demand for chargeable enhancements from new customers, and this is what is driving the reduction in TCV. As noted at the half year, our margins are quite sensitive to the amount of chargeable enhancement work we have as the cost base stays relatively fixed.

Turning to our final revenue stream, delivery. The ramp-up of the new projects was the major reason for the 15% increase in our delivery revenues in 2025. We have 11 projects underway where the customer is not yet live and only when these contracts are live, will they drive up our subscription revenues. Overall delivery TCV is showing us down year-on-year as a result of working through some of the large multiyear projects that we won in 2024. As these multiyear projects continue throughout 2026, the next 12 months TCV is actually flat year-on-year. Given that we are doing paid work for a number of customers in the late-stage pipeline, and we expect these projects to continue, we expect overall delivery revenues in 2026 to be higher than 2025.

Turning now to expenses. Cost of sales grew by 18% over last year, largely on the back of increases in costs from headcount and salary increases, along with a small drop in the amount of capitalization of internally generated software. Hosting costs increased with the growth in Alfa Cloud. Sales, general and admin expenses were up 12%. In addition to salary cost growth, there were increases in profit share due to the higher profits generated this year, share-based payments and increased amortization. FX has been significant in the period. We had net transaction gains of GBP 0.8 million. Within this, the gain from U.S. dollar FX hedges was GBP 1.5 million, offset by other FX losses of GBP 0.7 million. Other income from R&D expenditure credit was up at GBP 0.4 million.

Turning to cash flow. In March last year, I estimated the cash conversion for the year would be 80% to 90% due to accelerated receipts in 2024 from 2 projects. Cash conversion, in fact, has beaten this at 97%. The reason for this improved performance was again better-than-expected receipts at year-end. So again, I'm guiding to around 80% to 90% cash conversion for 2026 with 90% to 100% thereafter. Dividends paid increased GBP 3.9 million on last year to GBP 26.0 million. Overall, there was a net cash inflow of GBP 5.9 million, but a cash balance of GBP 26.4 million at the year-end.

Now some words on capital allocation. Alfa is a highly cash-generative business, and we have a strong track record of returning excess cash to shareholders through dividends. Cumulative dividends paid in the last 5 years are now up to GBP 167 million, and our overall dividend yield from ordinary and special dividends has been running between circa 3.5% to 5% per annum. As you know, we are very disciplined about allocating capital and keep this under review. There are no immediate investment requirements for our current excess cash. And so we are proposing an ordinary dividend of 1.5p and have declared a special dividend of 3.1p per share, in total, up 21% on this time last year.

Next, a brief update on modeling guidance. This slide is largely reiterating guidance I have given as I've gone through my presentation. However, FX is worth highlighting. It is perhaps easier to follow what is going on with FX if you split out the gain or loss on FX hedges from other FX gains and losses. As far as transaction and translation gains go, our sensitivity remains the same as before with each $0.01 movement in the U.S. dollar impacting revenue by GBP 500,000 and operating profit by GBP 300,000. We had an average rate of $1.32 for 2025. And if we had a rate say of $1.35 for 2026, that would reduce reported revenue by GBP 1.5 million and reported profit by GBP 0.9 million.

In addition to this, we had GBP 1.5 million of hedge gains in 2025. So total profit in 2026 will be lower than 2025 by GBP 2.4 million purely because of FX. Predicting what is likely to happen on the exchange rate is extremely difficult and seems to vary weekly. Earlier in 2026, we hedged 40% of 2026 U.S. dollar cash flows at $1.37. And so if the rate for the year was $1.35, which I used in the illustration I just talked about, we would also have a loss of GBP 0.2 million. So this will be a year-on-year swing in our hedges alone of GBP 1.7 million and so quite a headwind to profit growth. However, despite this and assuming the exchange rate does not move far from $1.35, we expect to see good revenue growth in 2026.

So a quick recap on what was an extremely strong set of financial results. Revenue of GBP 126.7 million, was up 17% at constant currency. This was at an operating margin of 32%, delivering an operating profit of GBP 40.1 million, up 17% on last year. Diluted EPS was 10.14p, up 18%. Cash conversion was excellent at 97%, resulting in a year-end cash balance of GBP 26.4 million. This cash balance, along with TCV of GBP 227.5 million gives us great strength going forward, allowing us to declare a combined ordinary and special dividend of 4.6p, up 21% on last year.

I will now hand over to Matt.

Thanks, Duncan, and hello, everyone. Firstly, from me, as always, a reminder of our strategy. The market that we serve is extremely complex, highly regulated, infinitely demanding and ever changing. Our opportunity is huge. We're the leading player in a massive market, and we currently have only a small market share. So our strategy for creating long-term sustainable business value is designed to maximize and enable us to grasp that opportunity.

To strengthen, to grow our differentiation by investing in our 3 key differentiators, our smart diverse team, our product and our delivery methodology and tooling; to sell, to enable profitable growth by focusing on building our community of single-tenant SaaS customers, increasing our subscription revenue and enabling incremental sales; to scale, to increase our capacity for developing and delivering Alfa Systems and extend our reach; and finally, to simplify, to enable more concurrent Alfa Systems implementations more efficiently.

Now as usual, I'll structure this update around our 3 key differentiators: our product, our delivery and our people. And Andrew will talk about exciting sales progress when I finished. But I'll start with a few words on Alfa's product and technology. And firstly, artificial intelligence. Alfa's market positioning, our product architecture and our business model provides strong foundations for long-term growth as the capability of AI technology evolves. So we view AI as an enabler of greater efficiency and greater customer value. We're excited about the possibilities, and our approach is deliberately pragmatic and grounded in real use cases that enhance productivity, delivery efficiency and product capability.

We focus our AI strategy on 4 areas: AI Literacy across the organization, ensuring that all of our people can effectively and responsibly leverage new tools. Internal efficiencies using AI to streamline processes, to reduce manual effort and to improve operational scalability, including in software development. Delivery Acceleration, applying AI to reduce implementation costs and time lines for customers, for example, through AskThea, our AI chatbot, which is in use by our delivery teams, by our customers and by our partners; and Product Enhancements, embedding AI within Alfa Systems where it solves customer challenges and improves automation, insight and decision support.

Expanding a little on the product enhancements theme. In 2026, we'll invest in architecture to simplify the process for expanding the use of AI by Alfa Systems customers in a secure and resilient way. Our vision is for our customers to be able to solve problems using AI, both in Alfa Systems itself and with Alfa Systems as part of a wider landscape. We'll continue to invest in demonstrable and productionized functionality, for example, multifunction self-service agents and intelligent document processing to automate credit workflow. The capability of technology in this area is moving forward fast, and we are leveraging that progress.

Now some of you may be relatively new to our story and may not be familiar with some of the intricacies of the market that we serve. So it's worthwhile repeating. And I'll do so while adding context around our view of the future of AI in our market. We are, of course, aware that many views have been expressed in the wider area recently. This is our take on the implications for Alfa. Firstly, deep functional domain capability makes simple replication of Alfa Systems by AI impossible.

Put simply, you can't vibe code an Alfa. To the extent that development of software will become easier in the future, we have a huge head start and the resources to capitalize on our position. And we see ourselves accelerating away from competition and potential future competition as development costs reduce. Secondly, whilst we do see generic AI automation tooling enhancing our ability to serve our customers, this will only be possible because those automation tools will be predicated on and governed by our enterprise software.

Alfa provides a vast, well-structured data framework that is based on a deep understanding of the complex enterprise context in which we operate. Our deeply embedded enterprise-wide software provides encoded institutional knowledge and system of record. Alfa Systems serves customers' line of business in an extremely complex market. And our regulated customer base requires embedded deterministic workflow and ledger transactions with clear audit trails and predictable interactions within a complex landscape. Probabilistic outcomes have no place, and this absolutely does not favor ungoverned AI outputs acting alone.

In this context, standardization, compliance, reliability, reversibility, integration, speed, authority models, security and specific industry practice matter much more than generic automation. And finally, software needs to be implemented. Enterprise software implementation projects within highly complex and regulated environments are necessarily huge business change exercises. We see AI increasing implementation efficiency, but we don't see it eliminating the implementation process. At Alfa, we have an unrivaled track record of delivery of these projects in intricate and interconnected contexts and where competitors consistently struggle. And this is a key aspect of our differentiation.

We should also be clear that Alfa Systems is priced based on the number of asset finance contracts managed on Alfa rather than per user. And this will ensure that AI-driven headcount reductions at customers will not impact Alfa's revenues. So while we do see opportunities for Alfa Systems as an enabler for Agentic technology that reduces system user numbers, this also represents an opportunity rather than a threat to our revenue. In summary, Alfa's market-leading technology stack and architecture, the scale and complexity of our software, our expansive and culturally embedded innovation and investment agenda and our robust revenue model ensure that Alfa is positioned to maximize the potential of AI technology as it evolves.

Turning to other areas in which our product, Alfa Systems has progressed. 2025 was a landmark year. In all of our key product development areas, we have worked in partnership with customers. This is our preferred way to develop software because it ensures market fit and because our customers co-invest sharing the cost. Our product investment keeps us ahead, wins new customers and also plays a part in ensuring that we don't lose customers. 2025 was a landmark year because we have developed MSPs or minimum sellable products in our 3 key expansion markets, 2 of which expand the scope of our existing serviceable addressable market, or SAM, U.S. auto originations and fleet, and the third of which takes us into a new target addressable market, commercial finance.

U.S. auto originations is exciting because of the scale of the opportunity. To date, our U.S. auto implementations have provided lease and loan servicing functionality, but all U.S. auto finance providers require an origination system in addition, and we believe that this market is underserved. We see the value of a U.S. auto originations implementation as between 1/3 and 2/3 of the value of our core servicing market, so a huge opportunity. We have already sold our origination solution to one large customer and the development that we've carried out to date has benefited hugely from partnering with that customer.

Implementation of Alfa for originations will follow from our servicing implementation. Fleet is exciting because it opens up the European auto finance market, where auto fleet management often sits alongside retail finance. We've already secured an initial sale in this market too, and the implementation is progressing well. And commercial finance is an adjacent market, which will, in time, increase our TAM. We've secured 2 sales within customers that are primarily focused on asset finance. And in 2026, we'll be stepping up our marketing efforts within the commercial finance world itself.

I've outlined some highlights here, but it's by no means an exhaustive list. Our product improves constantly, and we release a new version every 4 weeks. Every version includes many new features and functionality. 2025 saw us increase our investment in our product again, and 2026 will see the exciting product progress continue at pace. I've spent a lot of time talking about technology today, but our delivery track record and our people remain just as important in differentiating Alfa from competitors. If I had to cite a single differentiator, it would have to be culture. We have a culture of delivery. And it's really hard to deliver in this market.

We succeed where competitors frequently fail. We achieved 35 successful deliveries in 2026 and 20 customers are now live on the latest version of our software, Alfa Systems 6. In 2025, we started work with some smaller opportunities in the U.S., which is important because it has enabled us better to understand the requirements of lower-tier customers and to develop our Alfa Start solutions with the aim of creating a product for this market, including for partner-led delivery. We have a culture of growth individually and collectively. We put a lot into ensuring that we can attract the best people in our industries into developing our team and to engaging and retaining our team as we grow together.

We continued to grow our team with average headcount over the year of 516. We have strong retention at 97%, and we have strong engagement at 83%. Following the success of our Lisbon Smart Hub, we've set up a new smart hub in Gdansk, and we've welcomed new software developers and new members of our cloud hosting team. 2026 will see us set up a 24/7 hosting operations team in Gdansk. We've refreshed our talent management and pay and promotions process, moving away from heavyweight annual review towards a clear framework for ongoing conversations about skills development, goals, delivery and well-being.

And really importantly, we have a culture of inclusion and the social and environmental responsibility. And you can read more about this fundamental part of who we are in our 2025 sustainability report, which we released last week. We're in a fantastic position now, and we're excited about the future. Our culture remains key to that. We're extremely grateful to our team for making possible the success that we're reporting today as we grow this special company together. And we're also continuing to welcome new customers into our community, as Andrew will outline next.

Thanks, Matt, and I'll continue with the business and the sales update. The sales pipeline has been really strong during the year. The late-stage pipeline increased to 10 prospects and to add a little detail to that, touching on the early-stage pipeline, we've been focusing particularly on gathering industry knowledge and contracts in commercial finance. We've also seen strong interest in originations and fleet with multiple demos and overall, the activity in that early-stage pipeline has remained robust. We've been delighted by the interest in the results of the investment work that we've been doing, which really underscores our decision to build out the software in those areas.

Touching then on the late-stage pipeline. During FY '25, we added 5 new prospects, converted 1 into a win, 1 moved back to the mid-stage and 1 was lost. Overall, we ended the year with 10 prospects in the late-stage pipeline, which was up from 8 at the last year-end. And as I mentioned at the start of the presentation, we're doing paid work with 5 of them. We are a preferred supplier with 8, which gives us a huge amount of optimism that we will convert those to sold in due course. It's also worth noting that we've seen good spread across our regions with recent additions in Europe as well as our first South American prospect for in-country operations.

Turning then to the outlook. Demand for asset and automotive finance software remains robust as our pipeline demonstrates. Our people and delivery record, as always, are key differentiators. That's the case now, and we expect it to continue to be the case in the future. We've been working hard as before, to simplify our implementations, but we're increasing the use of AI and growing our capability to do more implementations as a result of this work. We expect further growth in delivery revenues, which will feed through into more subscription revenues in 2026 and beyond. We continue to invest in our product. Chargeable development work will vary depending on the mix of new customers in our pipeline.

For 2026, we expect this to be below the high watermark achieved in 2025. And our success in growing our U.S. business means that we're impacted by foreign currency exchange, which right now is a headwind. But in summary, we expect that 2026 will be a year of continued growth and momentum. So to summarize what you've been hearing today so far. 2025 has been a fabulous growth story for our single-tenant volume-based SaaS solution. Subscription revenue has grown 16%. We've seen 18% growth in subscription TCV. ARR was up 15% to GBP 43.9 million and NRR was at 109%, up significantly from 2024's 103%.

Overall, subscription revenues have contributed 34% to the total. I've talked about that strong sales and delivery momentum, a strong late-stage pipeline with 10 prospects in total, up from 8 last term. And we're working under LOE or equivalent with 5 of the 10 customers in the late-stage pipeline. We're seeing encouraging activity in the early-stage pipeline, and that activity is very much validating the software investment that we've been making in growing our addressable market. 20 customers in total are live on Alfa Systems 6, a really pleasing level of uptake that, as I said before, really underlines everything that we've said about this latest game-changing version of our software being frictionless for existing customers.

We continue to invest in people, product and planet. Headcount is up 6% with high staff retention at 97% and the investment that we've made in our key software asset was GBP 37.7 million. That investment focused on originations, fleet, commercial finance to drive us forward and to expand our opportunity. And carbon offsets purchased were greater than 100% of our emissions. So we're confident in our expectations and in our prospects. The Board has decided to declare a special dividend of 3.1p and an ordinary dividend of 1.5p, and we continue forward with that confident outlook. Thank you for listening.

[Operator Instructions] And we will now take our first question from Sven Merkt from Barclays.

Maybe first on Software Engineering, which you expect to drop this year. Can you comment how you see Software Engineering develop over the midterm and the extent we should anticipate this to become less of a headwind over the next years? And then secondly, thanks for the details on the AI-related product enhancements. Could you also speak there a little bit about how much customers are already demanding such features? Or if this is less a focus for now as customers want to see this technology mature more first? And with that in mind, when should we expect to start to see a more meaningful adoption of AI features?

Thank you very much, Sven. I think probably I'll ask Duncan to address the software engineering question, if that's okay. As I understand your AI question, let's take that first. And you're broadly speaking, asking about customer demand for AI. And I think across our customer base, there are lots of different levels of adoption on the AI side as there -- if there is in the broader industrial world? Our job, of course, is to make sure that we lead with the art of the possible, and we ensure that -- we create an ecosystem whereby customers can innovate their own artificial intelligence products, services and capabilities.

And as much as we can, like any piece of technology, we integrate it into our software, and we use that to make our customers more. In terms of time scales, well, I'll ask Matt to perhaps comment on the agenda at the moment. But we already, as you know, spend, but perhaps other listeners don't that we have our large language model, our chatbot. Our steer is in use by customers, partners and indeed by our teams. And we've got a pretty full agenda of things that we're putting into the software.

But Matt, you might like to talk to that briefly before Duncan talks about software engineering.

I would agree with you, yes. Customers are -- in the same way as we are, customers are positive about AI, but they're also balanced and they're also pragmatic. And for the most part, customers have functional requirements. I'm not going to pretend that we haven't had any conversations with customers along the lines of, we need to say something on AI, tell us your story. And of course, it's a part of the service that we provide that we are absolutely able to empower them for those internal conversations that they're having.

But for the most part, they are -- they have requirements. They have functional requirements, and we are able to serve those requirements using the system, and they don't necessarily care whether we do so using AI. Depending on your definition of AI, we've been using AI for very many years. And we've been -- we were early adopters of various AI technology. In terms of features in Alfa already, so we have lots of decisioning features in our workflow. Those aren't necessarily LLM related, but they may or may not be referred to as AI. We have ML for credit decisioning. And he has already mentioned AskThea. Then we have various -- in addition, various demos and various proof of concepts where we are integrating with large language models or agentic or intelligent document processing. And there's more to come in this area as well, expanding that functionality this year.

On software engineering, it's probably worth -- just taking a headline view on it. So 2025 was a really strong year for Software Engineering. We did a lot more chargeable development work for customers, very specifically, there was a lot of work around originations. And for next year, we see less demand from the type of customers and the nature of the markets they're in the pipeline for that Software Engineering work. So you can see from the slides, the 42% reduction in TCV for Software Engineering -- will, we believe, lead to a reduction in Software Engineering revenues next year.

Your question really was whether that will be a headwind beyond that into the medium term. It is quite difficult for us to forecast because it does depend on the customers that are coming, the markets they're in, the changes that they may wish to have for the system. The way we think about it is that 2025 is a very strong year. 2026 is definitely down on that. If I look beyond that and it's difficult to say, but probably I wouldn't necessarily at this moment, expect a headwind, i.e., '27, I would expect to be perhaps broadly in line with '26 or could be up. And beyond that, it's getting even more difficult to predict. So I think where we sit today, the big headwind is '26, and we wouldn't expect much of a significant headwind beyond that. But it very much depends on what's coming through in the pipeline.

Thank you, Duncan. And a quick additional comment from me on that before we move on. The one thing that we do know is that software engineering customer-facing workload is driven by newness where we're going into new areas, new countries and so on. So definitely, there will be an impact from the new functional areas that we have invested in as well as the continued expansion of our geographical reach.

We'll now take our next question from Harvey Robinson from Panmure Liberum.

I think 2 or 3 from me. Just picking up on that Software Engineering point. Obviously, at the trading update, you commented about a beat on revenue expectations largely due to that. And obviously, this was very strong year -- last year. How much of that beat, if you like, was taken from '26. I mean, could you quantify, is it more than that GBP 2 million number? I really trying to sort of smooth out the trajectory there? And then I've got a couple of other follow-ups.

Duncan -- sorry, Duncan, can you figured that?

I think the GBP 2 million is still broadly a good number. It's quite difficult. We do plan ahead the certainty that we have Software Engineering for the next 4 weeks, 8 weeks, 12 weeks is pretty high. And then obviously, it drops beyond that. But there was certainly work that we were expecting to do in 2026 that was accelerated in '25. And that obviously creates a very different picture. If we had slightly less software engineering revenues in 2025 and more in '26, that will be painting a slightly different picture and would reduce the headwind that Sven was just talking about.

So I think GBP 2 million is probably still a good number. Of course, actually, as Andy said, it's very much dependent on the types and units of projects and when they arrive. And that's -- so this is one area where a smooth growth path is never going to be -- is probably never going to happen. It's always going to be moving around a bit depending on what's happening with the pipeline.

And then just, I suppose, 2 related. In terms of implementation, you're obviously talking about increasing capability, you have been looking to partner with people to do that. Also has a reasonably consistent number 8% for some of that. But to what extent does implementation accelerate that subscription growth towards the 50% mark? And then coming back to the Software Engineering point, you've got that new commercial loan products coming. How much -- I don't know enough about the requirements there. Is that an area where the newness drives an acceleration of software engineering.

Could you just give us a bit of color for how your pipeline in commercial loans is building -- jumping around a little bit, but I think keen to understand when that becomes a real revenue contributor across the business? I think the most important question is to what extent -- what extent does implementation becoming easier to drive subscriptions towards that 50% target you've talked about in the past or near-term target?

Thanks, Harvey. I'll probably ask Matt to talk about the implementation and frankly, our continued drive to remove frictions from -- friction from our deliveries so that we can turn on more subscription. On the commercial loan side, you will be more aware than most people on this call of the size of the prize in terms of the commercial lending market. For us, because it's so big, we need to be able to bite off certain product types individually. And so we've started off with syndicated lending, which is in itself a massive addition to our addressable market.

One thing that we have said with commercial lending is there's a nice overlap with our home market, if you like, and in the asset finance businesses very often will have a small-ish commercial lending capability. And that means that in the first instance, we have a really good opportunity to get a greater share of wallet. And that's what's going on. So we're seeing some early-stage demand across all of those areas of investment. But on the commercial lending side, we've got some good conversations with a couple of existing customers, which is fantastic.

So yes, we're hoping that 2026, we'll see some real progress. One of the things that Matthew pointed out, we've got a minimum sellable product in those areas, which for us means that when we sell one, we're ready to go. So strong progress in all of those areas of investment, and we're very excited about commercial lending. You've asked the sort of repeat point around Software Engineering and the extent to which these new areas will drive it. The one thing that we do know where we have put -- well, anything we know that where we have gone into new areas, then the first, second, third, fourth, probably fifth organization that takes it at least will drive quite a lot of software engineering revenue, even within our home market, there's still stuff to do.

There's still development that we need to do on Alfa that people do something that's a little bit different or as I said, we've moved into a new jurisdiction or a new market. The sheer size and scale of the commercial lending market, I would imagine that as we start to become established, it will drive quite a lot of Software Engineering revenue as well as a requirement for investment from us. So yes, kind of yeses on all of those, but I'll ask Matt to talk about where we're going with delivery.

It's the strategy, Harvey, as you know. So the strategy is to reduce the number of days from the Alfa team per Alfa Systems implementation. And we've been doing that steadily over the last, well, several years. I've given some examples of the sort of thing that we've done in that area in the past. But all of it means that we can take on more and more new projects, and we can satisfy the demand that Andy and the revenue team are generating for us here at Alfa without growing the team to the same extent as we might have required had we not been able to simplify our implementations.

So our sphere is helpful in that area. It means that we require -- we're able to share expertise much more easily, including with our partners. Migration tooling is not very sexy, but it's very helpful in reducing the amount of time to increase volume on Alfa Systems, which speeds up the rate at which we're able to increase subscription revenue. Configuration was tooling, similarly, sharing configuration between environments, testing, configuration, bulk uploads, not super sexy, but really helping us to reduce the amount of effort required to get new customers live and to get new customers live with volume. And that plus the sales performance accelerates the growth in our subscription revenue, as you also outlined. So really exciting times for us.

Our next question is from Harold Evans from Singer Capital Markets.

A couple. Yes, I just wanted to double-click on that last question because I guess there's an argument that AI makes your delivery more efficient, software engineering are more efficient, therefore, charging on a T&E basis, you reduce that. And Andrew, I'd be really interested in particularly your perspective in over the longer term, is this -- it seems like that if there is a step change in efficiency and you can do more projects.

I'd be interested in your perspective because I assume that, that's possibly nothing that's completely new insofar as do you see this as a headwind or rather as Matt, you touched on, is it actually just the number of concurrent projects has been able to increase and such it hasn't been a net headwind to the business? And then I've just got one follow-up, if that's okay.

You've kind of answered your own question, Harold. That's absolutely right, but I'll put it into bold, italic and underline it. We see it as an accelerator for the longest time, as Matt said, we really like the consistency of strategy that we have at Alfa. We have been pushing in the same direction for quite some time now, driving towards that 50% level of subscription revenue that Harvey mentioned earlier. And directionally, anything that takes friction out of the implementation process is good news for us.

So AI comes along, and we think this is fantastic. This accelerates what we're already trying to do. Matt talked about things that may or may not be glamorous. I found all of those things glamorous, but that makes Matthew and myself in a minority. But AI is currently a very, very glamorous accelerant in being able to do more faster. But there are lots of ways we're able to do more faster. But there's an argument that Alfa Start as an accelerator is certainly short term, more profound in the effect it has on our ability to go faster.

But the strategic hypothesis, which is why I said you sort of answered your own question, is that we are an organization that is a market leader in a market that is much more massive than our current level of revenue. We're confident in our ability to sell into that market. We believe that we will, in general, be in a position where demand outstrips supply. So on the assumption we keep our delivery teams busy at all times, then AI will give us the ability to do more with the same number of people, and that has to be a good thing. And it's not new. To us, it's just an underlining of the same strategy.

And then just one go-to-market question, if that's okay, is that you've historically said it's difficult to persuade a prospect to spend GBP 50 million. But I wonder whether your move to becoming a more sort of modular vendor, whether it's originations fleet in that are you thinking any differently about your strategy given that -- obviously, it seems like originations is a very valuable product, but whether you're thinking more differently and being more sort of outbound such to sort of really capture what seems to be a large market opportunity.

That's a great question, Harold. And I'm going to put a quick postscript on my previous answer, by the way, because I think it's important. You asked us about the prospects of AI and making Alfa more efficient. You didn't, but I'll answer anyway the prospects of AI making our customers more efficient. And yes, it will. And of course, one of the things that we are doing is looking to deliver capabilities and functionality for our customers using AI and to give them the ability to integrate AI into the Alfa ecosystem. That makes them more efficient. But to remind everybody listening that Alfa does not license on a per seat basis.

So our customers becoming more efficient means that they can grow faster, and that is good for us, and there is no second order effect around our ability to generate revenues from our software. And I'm sorry for laboring it, but I think it is an important point when lots of people are talking about, I'm doing air quotes here, the death of SaaS. SaaS will only get bigger for Alfa. Great question on GTM. I've always said that demand generation is not a massive thing within enterprise sales at the scale that we do them. But your question is insightful, noting that as we move into some smaller areas of the market by partnering and all the things that Matt was talking about, Demand Gen may become more of a thing for us. But what is definitely a thing for us is incremental selling.

We've not made a big thing about it because we've had plenty of news to deliver to you, but we are advancing very, very quickly in product management. It's been an area of focus in terms of bringing new products and new modules to the market as well as being more intentional on the way that we go out to prospects and customers. And more modules means you don't necessarily -- it doesn't necessarily make a difference in terms of bringing people to market at all. But of course, it does give the opportunity for us to both new prospects and to existing customers -- and offer them more cool new stuff within Alfa that hopefully they'll take and that drives incremental sales. You're very right to point to originations as being, if you like, a mega incremental sale because it's much bigger as an opportunity than your average Alfa module. So go-to-market has changed, bigger opportunity in incrementals and yes, therefore, well said.

It appears there are currently no further questions. With this, I'd like to hand the call back over to our speakers for closing remarks.

Thank you very much. And this leaves me to thank everybody that took the time to listen to us this morning. I'll probably just parrot what Matthew said before, but maybe expand the remit a little bit. These are very, very exciting times for us at Alfa. We'll continue to turn in a good financial performance for you all. But at least as importantly, we are making great, great progress on strategic execution and moving into this great opportunity that presents itself going forward. So exciting times. We look forward to speaking to you next time around.