Alfa Financial Software Holdings Annual Report 2020

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FY2020 Annual Report · Alfa Financial Software Holdings

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D E V E L —
O P I N G

M O M E N
—T U M

Alfa Financial Software Holdings PLC
Annual Report and Accounts 2020

C O N T E N T S

2 0 2 0 H I G H L I G H T S

Strategic report
11 At a glance

12 CEO business review

16 Market overview

18 Our business model

20 Our investment case

22 Company strategy

24 Strategy in action

24 People

26 Strategic investment

28 Alfa iQ

30 Cloud Hosting

32 Partnerships

34 Alfa Start

36 Key performance indicators

38 Financial review

42 Risk Management

44 Principal risks

and uncertainties

50 Viability statement

52 Section 172 statement

56 Environmental, social
and governance

Governance
64 Chairman’s introduction

to governance

66 Board of Directors

68 Company Leadership Team

69 Corporate Governance Report

79 Nomination Committee Report

82 Audit and Risk Committee Report

88 Directors’ Remuneration Report

92 Directors’ Remuneration Policy

100 Annual Report on Remuneration

108 Statement of Directors’

responsibilities

109 Directors’ Report

Financial statements
113 Independent auditor’s report

120 Consolidated statement
of profit or loss and
comprehensive income

121 Consolidated statement
of financial position

122 Consolidated statement
of changes in equity

123 Consolidated statement

of cash flows

124 Notes to the consolidated
financial statements

154 Company statement
of financial position

155 Company statement
of changes in equity

156 Company notes to the

financial statements

Other information
160 Glossary of terms

162 Shareholder information

Group revenue

Operating profit

£79m

£64m in 2019

£24m

£14m in 2019

Net cash

Operating profit margin1

£37m

£59m in 2019

30%

21% in 2019

Special dividend

Number of customers2

£44.2m

nil in 2019

26 at 31 December 2019

Alfa team at
31 December 2020

360
employees

316 at 31 December 2019

Background image
options to come from
client

1. Operating profit margin being operating profit as a proportion of revenue.

2. Includes four pipeline customers at 31 December 2020.

D E V E L O P I N G
M O M E N T U M

W E A R E
A L L A B O U T
S O F T WA R E
& D E L I V E R Y

Alfa is a leading provider of software
and services to the global auto and
equipment finance industries. We
deliver our leading-edge technology
with smart, diverse people, making our
customers future-ready.

Exploring opportunities
in AI through Alfa iQ
Alfa iQ was established with a mission to
make access to assets efficient and successful
by delivering intelligence to the world’s auto
and equipment finance providers.

Accelerating growth
with Alfa Start
Alfa Start facilitates quicker
implementations both through
the Alfa Start implementation
model and as a project accelerator.

Read more in our whitepaper

on the impact of LIBOR reform
https://www.alfasystems.com/
eu/perspectives/libor-reform

Concise, responsive,
clearer user interface
This year we introduced a new user
interface to Alfa Systems, code-named
Mercury, the first to be entirely driven
by direct end-user feedback. The refresh
to leading-edge technology has improved
user experience and eased training
requirements, while the faster, more seamless
transitions have increased productivity.

We continue to engage in regular end-user
research sessions, watching people use
Alfa Systems in their day jobs. This helps
guide us on how the user interface can be
continuously improved and, combined
with our close customer relationships,
helps us to prioritise investment.

Alfa is committed to continuing
collaborations with our customers,
including through hosted user groups,
identifying opportunities to create
meaningful improvements and a seamless
experience on the platform.

Link to strategy

Sales

Simplification Partnerships

Strategic reportGovernanceFinancial statementsOther information
28

S T R AT E G Y I N A C T I O N C O N T I N U E D

Alfa iQ
Alfa iQ was established
to deliver intelligence
to the world’s auto
and equipment
finance providers.

Artificial intelligence
and machine learning
Embedding Artificial Intelligence (AI) into
business applications, more specifically
through the use of Machine Learning
(ML) is becoming more commonplace.
Numerous organisations are using modern
machine learning techniques to improve
user experience and drive wider adoption
based on data, from SaaS applications
that we use every day through to auto
and equipment manufacturers who are
pushing the boundaries of what can
be automated. With more tools and
platforms being released all the time
to facilitate machine learning, this is a
branch of technology that is only going to
become more mainstream, even in more
risk averse industries like asset finance.

There are numerous challenges, covering
areas as wide as ethics, bias, fairness,
data quality and interpretability but none
of these are insurmountable. The path
forward will require collaboration between
experts in business sectors with those who
deeply understand the application of the
right technology.

It is understandable that the excitement
for the possibilities that AI and machine
learning present could be weighed down
by the associated risks and challenges but
this is where we at Alfa feel that we can
make a difference by applying our deep
knowledge of asset finance and partnering
with recognised experts to develop new
propositions to better support customers
in our target markets.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Potential cost savings
for banks from AI
applications by 20231

$447bn

1. Autonomous Next research.

Highlights
2020 saw the formation of our joint
venture with Bitfount, Alfa iQ. Alfa iQ
was established with a mission to make
access to assets efficient and successful
by delivering intelligence to the world’s
auto and equipment finance providers.
The joint venture brings together Alfa’s
industry experience and asset finance
data structures, with Bitfount’s team
of AI data scientists. Our ambition is
to provide the best machine learning
models for the asset finance industry.

We have been steadily introducing
Alfa iQ to leading industry players,
including but not limited to existing
Alfa customers. This has culminated in
starting work with our first customer,
with early results showing the potential
for improved returns, which could be of
the order of an increase of 1% or more
in return on capital. In addition to our
first customer, we have three qualified
leads in the late-stage pipeline.

A core strategy group consisting of senior
leadership from Alfa and Bitfount has
worked to define the strategy for Alfa iQ,
prioritising a roadmap of the use cases for
AI in asset finance.

Plans
We will continue to work to expand our
customer base, with the aim to deploy
our first models into production. In order
to achieve this, we will need to build out
a core Alfa iQ team and our product
offering. The latter will focus on the
use cases which have been highlighted
by our research and experimentation.

Another key objective will be to prove
the advantages of AI over traditional
approaches, helping the wider industry
better understand the benefits and
promote further adoption. For this
purpose we will be producing further
white papers on machine learning and
aim to release a case study with one
of our early customers later in 2021.

Link to strategy

Product

Delivery

Strategic reportGovernanceFinancial statementsOther informationScalability
• Invested in our platform to automate

the rollout of security and infrastructure
patches. Reducing the time spent per
environment on routine tasks will ensure
that we can support an increasing
number of environments for an increasing
number of clients going forwards.

• Invested in a fully automated

monitoring solution covering all
aspects of our managed infrastructure
to provide our 24/7 support team
with exactly the information they need
at the moment they need it. This will
ensure that the teams supporting
our client environments can provide
a high quality service to an increasing
number of environments without
needing to scale the team.

2021 will see opportunities to automate
more of our processes and to continue
to improve the customer experience
wherever we can. Our investment in
technology and automation is allowing
us to support a growing number of
clients more quickly than we are
growing the team.

S T R AT E G Y I N A C T I O N C O N T I N U E D

Cloud Hosting
Alfa Hosting is a fundamental
part of our strategy to deliver
Alfa more efficiently and offer
our clients value earlier in the
implementation process.

Delivery
• Live with four clients across EMEA

and the Americas. Two of these used
Alfa Start and one was a migration
from an on-premises Alfa installation.

• Managing infrastructure for

10 clients currently in the project
implementation phase.

• Provided infrastructure to accelerate
projects which will eventually be
managed by our clients in their data
centres or the cloud.

• Supported other areas of Alfa Systems
business providing environments and
experience to support external partner
and client training and our sales teams.

Alfa Hosting is a fundamental part
of our strategy to deliver Alfa more
efficiently and to offer our clients value
earlier in the implementation process.
When clients select Alfa Hosting, their
users and engineers are able to start
using Alfa from the beginning of the
project in support of integration,
configuration and testing. In 2021
we will continue to provide secure, high
performance infrastructure to new and
existing clients allowing them to focus
on delivering value to their business.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
31

Technology
• Delivered a complete solution for

the deployment of the Alfa reporting
platform along with offering the
replication of real-time reporting
data to client-managed data stores
for consumption into a data lake
or integration layer.

• Delivered support for OAuth/OIDC

for API authentication and authorisation
alongside a managed OAuth authorisation
server offering clients flexibility in how
they secure API access.

• Delivered support for flexible rate

limits configurable against specific APIs.
This will allow the safe deployment of
internet-facing APIs for use in web
applications or from external services
and augments our digital strategy.

2021 will see a continued investment
in our platform to support seamless
multi-region disaster recovery, a
client-facing management portal and
investment in our containerisation strategy
to simplify deployments. We will also be
implementing support for additional
messaging services such as Amazon SQS
to provide our clients with more flexibility
in their integration solutions.

Link to strategy

Delivery

Sales

Simplification

Strategic reportGovernanceFinancial statementsOther information32

S T R AT E G Y I N A C T I O N C O N T I N U E D

Highlights
This year we have successfully scaled our
partner relationships, remotely onboarding
one large partner intake and embedding
more partners in our project teams, sales
activities as well as in client-side/SI roles.
On the delivery side, partner resources
have been utilised across six customer
projects in four different geographies
and we have seen three partner assisted
projects go live.

We have also grown our partner ecosystem,
agreeing engagement terms with Accenture
and initiating a global collaboration with
another notable professional services
organisation for the combined marketing
and delivery of the Alfa Systems platform.

We have continued to invest in partner
training, further developing our training
programme including the creation of a
technical course for SI partners. Updates to
our partner portal and access to additional
resources mean that our partners have
better access to supporting information
and tooling, bringing increased efficiencies.

Plans
In 2021, we will continue to scale our
existing partnerships and evaluate other
potential partners to strengthen further
our partner ecosystem and core market
coverage. This will include commencing
partner assisted delivery in North America.

Partnerships
Our partner programme
is a key part of Alfa’s
long-term growth strategy.

Approach
Partnerships are an important growth
accelerator, bringing a number of benefits
to Alfa and our customers.

We work with a small, carefully selected
partner ecosystem of like-minded
organisations with geographical spread
and complementary delivery capabilities.

We utilise three types of partnering –
the first is staff augmentation where
industry expert partner staff augment
our teams and assist with our standard
implementation consultancy work with
Alfa priming the delivery. Typical roles
include configuration, training and
testing support.

The second type is working with Systems
Integrators to perform activities outside
of Alfa’s standard implementation scope
and which are key to the successful
delivery of the project. Typical roles
include programme management,
integration development, test
management, document production
and report creation.

The third type is working with
technology partners for out of the box
integrations with best of breed solutions.

• Increased operational capacity through

partner staff augmentation of our
teams, allowing us to deliver more Alfa
Systems implementations concurrently.
• Greater flexibility to change resourcing
rapidly by leveraging our partners size
and bench strength.

• Increased sales opportunities through
joint business development and access
to a wider range of customers though
our partner network.

• Faster/less risky implementation

projects through smoother system
integration by skilled Systems
Integrator (SI) partner resources
with Alfa experience.

• Extended local market expertise,

language skills and presence enabling
more effective sales and implementation.

• Client-side resourcing capability

through our partner network, allowing
us to provide an additional service
to customers.

• Extended product offering and

simplified implementations through
integrating Alfa Systems with
complementary solutions from
technology partners.

Partner
relationships

Alfa Financial Software Holdings PLC Annual Report and Accounts 202033

Sales collaboration helping
to secure long-term growth
in our project pipeline
Sales collaboration is an important
aspect of our partnerships, with new
sales acting as a growth accelerator,
both for Alfa and for scaling our partner
relationships further. Selling with partners
also enhances the effectiveness of our
partner relationships through mutual
trust and cooperation.

In EMEA we have one early stage
opportunity that will be a co-bid with
a partner. In North America we have two
late stage opportunities which, if sold,
will be our first partner assisted delivery
projects in this region.

We work closely with our partners on joint
marketing and research opportunities,
enhancing our visibility within the industry
and giving our collaborations increased
credibility with prospective customers.

Partners continue to provide local language
and market expertise that is invaluable in
the sales process, particularly with regard
to new market entry opportunities.

We have also benefited from increased
sales channel opportunities via our partner
relationships and the extended global
reach and credibility they provide.

Link to strategy

Delivery

Partnerships

Proven partner assisted delivery
This year we have seen notable partner
assisted delivery success with three
partner assisted projects going live.
Taking one of these projects below
as a case study:

Alfa Systems implementation for
a leading South African Bank
Approximately a third of the Alfa
implementation team comprised staff
augmentation partners from Teamwill
Consulting. This ranged from between
three and five partner resources over
the duration of the project, covering
Alfa Systems configuration, supporting
the creation of business processes,
producing new document templates
and supporting the client reporting
and UAT activities. All partner resources
came with strong industry knowledge
and systems implementation experience,
and for the lead partner resource this
was his fourth Alfa project.

Quoting Nathan Dean, the Alfa project
manager, regarding his experience
managing a partner assisted team:

“I have been really impressed with the
partners from Teamwill assisting on
the project. They are smart, confident
and experienced, and they’ve been
successfully delivering on a number of
key roles on the project and providing the
high level of service I would expect of an
Alfa consultant. What’s more, they fit in
really well with the Alfa and client teams,
which is something that I think is equally
important, particularly when working
on secondment as we have been”.

Partner assisted project
go-lives in 2020

Ongoing partner
assisted projects

Strategic reportGovernanceFinancial statementsOther informationWhy this is exciting for Alfa
Alfa Start contributes to Alfa’s strategy
by consolidating the expected use of
Alfa, allowing us to add new clients
without increasing the complexity of
the software we build and maintain.

Alfa Start facilitates quicker implementations
both through the Alfa Start implementation
model and as a project accelerator.
The amount of effort often duplicated
across implementations is reduced,
enabling more concurrent projects.

The rapid implementations enabled by
Alfa Start make the Alfa Systems product
available to a wider range of customers,
not just Alfa’s traditional large enterprise
implementation customers. It also
complements phased implementation
approaches, allowing them to realise
value sooner.

Alfa Start is a product of internal strategy
and investment. Its success and interest
from our target markets in 2020 reinforces
our direction and processes. Furthermore,
Alfa Start also highlights the ability of our
people to not only deliver Alfa projects,
but also their creativity, collaboration and
expertise within the asset finance industry.

First UK Equipment Start
implementation live in:

19 weeks

S T R AT E G Y I N A C T I O N C O N T I N U E D

Alfa Start
Alfa Start not only highlights
the ability of our people to
deliver Alfa projects, but also
their creativity, collaboration
and expertise within the asset
finance industry.

What we have done
during the year
2020 saw a number of Alfa Start successes
with the first UK Equipment Start and US
Auto Start implementations going live in 19
and 22 weeks, respectively. This coincided
with marketing launches for each variation,
increasing market awareness and bringing
Alfa Start to the forefront of discussions
with prospective clients.

2020 also saw the commencement of
a second UK Equipment Start project
and a number of other new projects using
Alfa Start as an accelerator. This was not
just limited to the markets for which Alfa
Start directly serves; we also saw projects
in other regions, such as Asia Pacific, use
Alfa Start to propel their implementation.
Projects that implement Alfa Start as an
accelerator serve as a useful tool for
expediting implementations, exploring
future Alfa Start offerings and providing
another avenue for feedback and subsequent
development of our existing products.

A number of internal investment initiatives
have also begun to ensure continuous
development of Alfa Start. This includes
incorporating project feedback and new
product features, expanding functional
and integration capabilities, establishing
more client-facing documentation and
improving internal testing.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202035

2021 opportunities
Recent years have seen a shift in
appetite for technology projects
amongst asset finance providers.
The emphasis is now less on projects
with large scope and long implementation
timelines, and more on minimum viable
product implementations. It is expected
that this trend will continue in 2021.
Alfa Start satisfies this demand, allowing
clients to implement Alfa Systems sooner
and make changes after go-live. This year
has highlighted the importance of strong
enterprise technology and it is expected
that the economic implications of Covid-19
will result in more providers looking to
cheaper implementation models.

2021 will also see a number of existing
implementations progress. The benefits
of Alfa Start are compounding; each
implementation provides the opportunity
to gather feedback, build more expertise,
make improvements and build our Alfa
Start user group. This, combined with
keeping our Alfa Start offering in line with
Alfa’s latest features, industry trends and
technology will further cement our
class-leading offering.

Link to strategy

Product

Delivery

Sales

Volume Market

How it has contributed
to the Alfa strategy
Alfa Start enables simplification in a
variety of areas of an implementation
project including planning, process design,
testing, and integration design and build.
Shorter implementation timelines present
Alfa as a more competitive package,
especially amongst smaller asset finance
providers in key markets.

Alfa Start is complemented by Alfa
Hosting, which allows clients to use
Alfa without having to establish and
maintain environments. Together, both
allow the client to go live quicker with
an Alfa platform that meets both the
functional and technical requirements.

Finally, Alfa Start consolidates the expected
use of Alfa, making partner onboarding
simpler and in turn providing more options
for project staffing. This, combined with
the reduced implementation timelines,
make Alfa Start a key factor in Alfa’s ability
to run more concurrent implementations.

First US Auto Start
implementation with
a strategic client live in:

22 weeks

Strategic reportGovernanceFinancial statementsOther information36

K E Y P E R F O R M A N C E I N D I C AT O R S

Measuring our performance
Alfa measures a range of Financial and
Operational metrics to help manage business
performance. During 2020 we reviewed our
KPIs and rationalised them to focus on those
that are most critical to performance delivery.

Our strategic priorities

People

Product

Delivery

Sales

Financial

Group revenue
£78.9m

2020

2019

2018

Simplification

Partnerships

Volume Market

2020 performance
Group revenue performed positively
across all revenue streams with
particularly strong growth in ODS
and Maintenance. ODS revenues
increased as a result of activity with
pre-implementation customers, along
with increases in post go-live support
for some of our customers.

Why do we measure this?
Growing revenue is a measure of
customer and business success.
It is central to our objective of
growing by maintaining our
leading competitive position
through differentiation of
People, Product and Delivery.

78.9

64.5

71.0

Linked to remuneration:
Yes

Links to strategic priorities:

23.9

22.4

30%

32%

Operating profit
£23.9m

2020

2019

2018

13.7

Operating profit margin
30%

2020

2019

2018

Cash
£37.0m

2020

2019

2018

21%

37.0

58.8

44.9

Operating free cash flow conversion
114%

2020

2019

2018

114%

138%

86%

Total contract value (TCV)
£112.9m

2020

2019

2018

112.9

80.5

106.0

2020 performance
The favourable Operating
profit performance was driven by
increased Group revenues, partially
offset by an increase in the cost base
as we continued to invest across the
business, principally in headcount.
Some of the cost increase was offset
by reduced spending as a consequence
of the pandemic.

2020 performance
Operating profit margin has improved
significantly during the year due to
the benefit of Group revenue flowing
through to Operating profit at a
greater rate than the cost base
increase (see comments under Group
revenue and Operating profit above).

2020 performance
During 2020 a special dividend
of £44.2m was paid, reducing
the Group’s Cash balance. After
adjusting for this underlying Cash
has further improved due to a
favourable Operating free cash
flow performance together with
collection of £3.6m of one-off licence
revenues recognised during 2019.

2020 performance
Operating free cash flow conversion
continued to perform well driven by
positive business performance and
continued focus on cash management.
Relative to 2019 the metric has reduced
due to that year’s performance being
boosted by the recovery of receivables
where the related revenue was recognised
in previous years. Note 2018 and 2019
have been restated – see page 37.

Why do we measure this?
Operating profit is an indicator
of the Group’s profitability. It can
be used to analyse the Group’s core
operational performance without
the costs of capital structure and
tax expenses impacting profit.

Linked to remuneration:
Yes

Links to strategic priorities:

Why do we measure this?
Operating profit margin is a measure of
how effectively we sell Alfa Systems
and manage our cost base. It also
allows comparison across different
companies and sectors.

Linked to remuneration:
Yes

Links to strategic priorities:

Why do we measure this?
Cash is critical to allow the Group to
cover its expenses, provide funds for
investment, growth and to meet its
long-term needs. Cash generation
is a good indicator of the underlying
health of the business.

Linked to remuneration:
Yes

Links to strategic priorities:

Why do we measure this?
A strong unencumbered balance sheet
position is key to growing the business
in the future. Our business has always
been cash generative and this KPI
allows us to monitor cash flows before
investment in capital projects.

Linked to remuneration:
Yes

Links to strategic priorities:

2020 performance
Year on year total TCV has seen
significant growth from 31 December
2019 with improvements across all
elements and in particular increases
in ODS and Maintenance TCV.
See page 39 for further detail.

Why do we measure this?
Helps to predict revenue and
the value of a contract over
its lifetime, which will generally
extend beyond the current financial
year. See page 37 for a detailed
explanation of the calculation.

Linked to remuneration:
No

Links to strategic priorities:

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020

Definition and KPI
calculation method
In considering the financial performance of
the business, the Directors and management
use Key Performance Indicators (KPIs), some
of which are defined by IFRS and some of
which are not specifically defined by IFRS.

We believe that Operating free cash flow
conversion is a key measure required to
assess our financial performance. It is
used by management to measure liquidity.
This measure is not defined by IFRS.
The most directly comparable IFRS
measure for Operating free cash flow
conversion is Cash flows from operations.
The measure is not necessarily comparable
to similarly referenced measures used by
other companies. As a result, investors
should not consider this performance
measure in isolation from, or as a substitute
analysis for, our results of operations as
determined in accordance with IFRS.

Operational

Headcount
360

2020

2019

2018

Retention rate
93%

2020

2019

2018

360

316

312

93%

83%

88%

Employee engagement
72%

2020

2019

2018

72%

46%

61%

The calculation method for each metric is as follows:

(1) Headcount
Represents the number of Alfa employees
under contracts of employment as at
31 December of each year.

(2) Retention rate
Represents the retention of Alfa employees
over the previous 12-month period, excluding
any managed staff attrition.

(3) Total contract value (TCV)
TCV is calculated by analysing future contract
revenue based on the following components:

(i)

(ii)

an assumption of three years of maintenance
and Cloud Hosting payments assuming these
services continued as planned (actual
maintenance and Cloud Hosting contract
length varies by customer);

the estimated remaining time to complete
any software implementations and recognise
deferred licence amounts (which may not
all be under a signed statement of work).
Where licence is paid on a monthly subscription
it has been assumed to continue for three
years assuming these services continued
as planned; and

(iii) ODS work which is contracted under

a statement of work.

Given this KPI is forward looking, in calculating
the TCV we have used the budget 2021 exchange
rates. These budget rates are; USD; 1.29,
EUR; 1.11, AUD; 1.84, and NZD; 1.96.

(4) Employee engagement
Extracted from bi-monthly employee Pulse
survey ratings. Questions asked are “Would
I recommend Alfa to a friend as an employee”,
“I am happy with Alfa’s strategy and business
goals” and “Alfa has an excellent atmosphere
and culture.”

(5) Operating free

cash flow conversion
Operating free cash flow is calculated as
cash generated from operations, less capital
expenditures, less the principal element of lease
payments in respect of IFRS16. Operating free cash
flow conversion represents Operating free cash flow
generated as a proportion of Operating profit.

As explained on page 41 we no longer report
the Adjusted EBIT measure. Operating free cash
flow conversion was previously calculated using
Adjusted EBIT rather than Operating profit.
In addition, total lease payments were previously
included in Operating free cash flow; in order to
make the cash flow measure consistent with the
profit measure we have changed Operating free
cash flow to only include the principal element
of lease payments. The 2019 and 2018 KPIs have
been restated accordingly from 142% to 138%
and from 87% to 86% respectively.

2020 performance
Headcount has increased due to
planned recruitment and investment
continuing across the business
together with an improved employee
Retention rate.

Why do we measure this?
Our Revenue growth and ability
to win new business is heavily
dependent on the number and
deep expertise of our people
and therefore growing our team
for the future is key to this goal.

Linked to remuneration:
No

Links to strategic priorities:

2020 performance
The Retention rate has improved
during the year due to greater
employee satisfaction (visible in
the significantly improved Employee
engagement metric below) as a result
of continued focus and initiatives
to drive improvements in this area.
This has also been helped by lower
attrition due to the pandemic.

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

2020 performance
Employee engagement has improved
significantly during the year, to a
three year high, due to a particular
focus from senior management on
this area. Initiatives to help employees
stay positive during the pandemic
have also contributed to this
favourable performance.

Why do we measure this?
Measures levels of employee
satisfaction and connection to
the business. There is a positive
correlation between employee
engagement and business
performance and the metric
should be a lead indicator for
Retention rate performance.

Linked to remuneration:
No

Links to strategic priorities:

Linked to remuneration:
No

Links to strategic priorities:

Linked to remuneration:
No

Links to strategic priorities:

Greenhouse gas emissions
per 1,000 square feet (tCO2E) 198

2020

198

2019

2018

821

890

2020 performance
Our emissions have fallen significantly
due to much reduced travel driven
primarily as a result of the pandemic
combined with a review of travel
needs generally.

Why do we measure this?
Responsible operations and
a commitment to a positive
Environmental, Social &
Governance (ESG) agenda.
We are committed to a position
of carbon neutrality through
assessing our carbon footprint
and emissions.

Strategic reportGovernanceFinancial statementsOther information

F I N A N C I A L R E V I E W

“ Despite the challenges we have

faced in the year we have delivered
a strong financial performance and
paid our first dividend as a listed
company, whilst retaining a robust
balance sheet.”

Duncan Magrath
Chief Financial Officer

Financial results

£m

Revenue

Operating profit

Profit before tax

Taxation

2020

78.9

23.9

23.2

2019

64.5

13.7

13.0

(2.9)

(2.8)

Basic Earnings Per Share

6.93p

3.50p

Movement
%

22%

74%

78%

98%

Operating profit increased by £10.2m to £23.9m (2019: £13.7m),
due to the £14.4m increase in revenues, partially offset by a
£4.1m increase in expenses, of which £3.2m was as a result of an
increase in research and product development expenses, £2.5m
was as a result of an increase in sales, general and administrative
(SG&A) expenses, net of a £1.6m decrease in implementation
and support expenses.

Net finance expense of £(0.7)m (2019: £(0.7)m) resulted in profit
before tax of £23.3m (2019: £13.0m) and with an effective tax
rate of 12.4% (2019: 21.7%) the resulting profit for the period
was £20.4m (2019: £10.2m).

We started 2020 expecting to see a drop in both revenue
and profit compared with 2019 as a result of the economic
uncertainty. However, as the year progressed, our expectations
for the full year increased. Through a number of trading updates
issued in the second half of the year we highlighted the increasing
expectations for full year revenue and profit. Our final result is
ahead of our 17 December 2020 trading update principally due
to the licence fee revenue recognition in respect of the five year
contract extension that was agreed towards the end of the year
and which was confirmed in a trading update on 26 February
2021. Overall the results show strong growth over FY19.

Revenues increased by £14.4m to £78.9m in the twelve months
ended 31 December 2020 (2019: £64.5m) with increases across
all revenue streams, but with particularly strong growth in ongoing
development and services (ODS) revenues, up 38% to £32.4m
and maintenance which was up 29% to £19.2m. ODS revenues
increased as a result of work with pre-implementation customers,
along with increases in post-go live support work for some of our
key customers. In 2020 ODS revenue benefited from £5.6m of
one-off licence revenues associated with a five-year contract
extension. This was almost exactly matched the £5.5m of
one-off licence revenues recorded in 2019. Maintenance
revenues increased in 2020 due to increased levels of hosting
activity, inflationary increases and a higher volume of contracts
being supported for certain customers.

Revenue
Revenue – by type
£m

Software implementation

ODS

Maintenance

Total revenue

2020

27.3

32.4

19.2

78.9

Movement
%

38%

29%

22%

2019

26.1

23.5

14.9

64.5

Software implementation revenues increased by £1.2m, or
by 5%, to £27.3m in 2020 (2019: £26.1m), reflecting the six
ongoing implementation projects from the end of 2019 and
three additional projects that were commenced during 2020.
One of these continuing projects was our first Alfa Start
implementation which was completed and moved to the ODS
revenue category during the period. Of the three additional
projects that commenced during 2020, one was a customer who
signed a contract but then cancelled before significant activity was
underway as a result of the pandemic, one related to a customer
who had previously put their implementation project on hold
during 2018 and one was our second Alfa Start implementation.
As such, the Group has seven ongoing implementation projects
as at 31 December 2020.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Software implementation revenue
£m

New

Ongoing

Paused / Restarted

Completed

2020

0.1

24.9

1.3

1.0

2019

ODS
£m

–

New

25.0

Pre-implementation

(0.2)

Ongoing

1.3

One-off licence revenue

Total Software implementation revenue

27.3

26.1

Total ODS revenue

2020

2019

4.0

3.9

18.9

5.6

32.4

–

2.5

15.5

5.5

23.5

One of the projects classified as ongoing at the end of 2020
completed its pre-implementation phase in October 2019.
This customer contributed £6.7m to ongoing software
implementation revenue in 2020 (2019: £1.2m). Revenue
from the remaining implementation projects classified as ongoing
in the table above contributed £18.2m in 2020, a decrease of
£5.6m compared with £23.8m in 2019. This decrease is primarily
due to the fact that during 2019 the largest of these ongoing
implementation projects was running two phases concurrently,
however, the larger of the two phases went live in January 2020 and
as a result moved to the ODS category at this time. This decrease
was then partially offset by write-backs of licence revenues in the
prior year. These write backs resulted from the deferral of certain
go-lives dates and the establishment of material right to use liability,
reflecting discounts of the right to use renewal payments customers
will be required to make in future years.

During the year one implementation project that had previously
been paused in 2018 restarted and contributed £1.3m in 2020
(2019: £(0.2)m).

Revenue from the implementation projects that were completed
or cancelled in the period contributed £1.0m (2019: £1.3m).
The ongoing revenue from these projects has moved to the ODS
category following implementation completion.

ODS revenues increased by 38% or £8.9m to £32.4m in 2020
(2019: £23.5m). This significant increase was the result of:

• An increase in revenue from customers from pre-implementation
work of £1.4m. During H1 2020 the Group had three customers
who were undertaking pre-implementation work. One of these
moved to implementation during the first half but as previously
noted was subsequently cancelled due to the economic uncertainty
at the time. In the second half of 2020 we mutually agreed
with one customer to bring the project to an end due to being
unable to agree on contractual terms. The third contract
moved into implementation in early 2021. During H2 2020,
three new pre-implementation projects commenced.

• An increase of £4.0m due to new ODS customers. This includes

revenue from those customers who on completing their
implementation project, or one phase of their implementation
project, transitioned to the ODS category during the period.
• An increase of £3.4m of revenue from ongoing ODS customers
resulting from the current mix of ODS projects in 2020 compared
to the prior year. In particular several key customers have ongoing
ODS specific projects to either upgrade from v4 to v5 of the Alfa
Systems or expand the use of Alfa to new geographical regions.
• An increase in one-off licence revenues of £0.1m. In 2019 we
recorded £5.5m of one-off licence revenue of £1.6m received
when a customer exceeded their current licence band, and
£3.9m due to the extension of a previously terminated contract.
In 2020 this same customer chose to extended for a further
five years through to October 2025. This resulted in £5.6m
of additional licence revenue which was recognised in 2020
on agreement of the five year extension.

Maintenance revenues increased by £4.3m, or by 29%,
to £19.2m in 2020 (2019: £14.9m). This increase was partly
due to inflationary annual maintenance price rises, a higher
volume of contracts being supported for certain customers
and an increased number of customer utilising the Group’s
relatively new Cloud Hosting offering.

Maintenance
£m

Maintenance

Hosting

Total Maintenance revenue

Total Contract Value (TCV)
£m

Software implementation

ODS

Maintenance

Total TCV

2020

16.6

2.6

19.2

2020
H1

32.5

6.4

57.5

96.4

2019

14.4

0.5

14.9

2019
FY

27.4

8.0

45.1

80.5

2020
FY

32.4

12.2

68.3

112.9

Total contract value (TCV) – as defined in the definition section on
page 37 – at 31 December 2020 is £112.9m (30 June 2020: £96.4m,
31 December 2019: £80.5m). Implementation TCV has remained
relatively stable compared to H1 2020 due to the further completion
of ongoing software implementation projects which has been
almost completely offset by the addition of a new software
implementation project that commenced in January 2021.
ODS TCV has increased compared to H1 2020 as a result of
a number of new statements of work being contracted prior
to 31 December 2020. The largest movement compared to H1
2020 has been to the maintenance TCV which is principally due
to a maintenance element of the new five year contract extension
referred to above, and more of our clients moving to a Cloud
Hosted solution, (we have included three years’ worth of the
maintenance, from the five year extension contract, and of
planned hosting revenues within the maintenance TCV figure).
Of the £112.9m total TCV at 31 December 2020, £52.5m is
anticipated to convert into revenue within the next 12 months,
assuming contracts continue as expected and are not cancelled
or delayed. This includes £17.6m of software implementation
revenues, £12.2m of ODS revenues and £22.7m of maintenance
(and hosting) revenues.

Operating profit
The Group’s operating profit increased by £10.2m, or 75%, to
£23.9m in 2020 (2019: £13.7m) primarily reflecting the £14.4m
increase in revenues, partially offset by an increase in the Group’s
cost base as we continued to invest in the business, through
increased headcount and partner costs, offset by reductions in
travel, conference and marketing costs, as a consequence of the
pandemic. The Group’s operating profit on a constant currency
basis increased by 73%.

Strategic reportGovernanceFinancial statementsOther information40

F I N A N C I A L R E V I E W C O N T I N U E D

Expenses – net
£m

Implementation and
support expenses

Research and product
development expenses

Sales, general and
administrative expenses

Other income

Total expenses – net

2020

2019

Movement
%

15.3

16.9

(9)%

18.9

15.7

21%

21.3

(0.5)

55.0

18.8

(0.6)

50.8

13%

–

Headcount numbers as at 31 December 2020 were 360
(2019: 316), and our staff retention rate has been 93%
over the 12 months to that date.

Implementation and support (I&S) expenses have decreased
by 9%, to £15.3m (2019: £16.9m). I&S expenses predominantly
comprise personnel costs, travel and partner costs, with the
total of these contributing 88% of the total I&S expenses
(2019: 87%). In the year the average software implementation
headcount decreased by 6, to 102 employees (2019: 108
employees). In addition, the Group’s travel costs significantly
decreased as our project teams were not travelling due to the
pandemic, which also resulted in some reduced customer billings.
The corresponding reduction in personnel-related and travel
costs were partially offset by the increase in partner costs of
£1.5m during 2020, reflecting the Group’s focus on delivering
on its strategic objectives of utilising partners. In 2020 we
deployed partners on six of our customer projects, including
pre-implementation, implementation and v4 to v5 upgrade projects.

Research and product development (R&PD) expenses
increased by £3.2m, or 21%, to £18.9m (2019: £15.7m). 86%
of R&PD expenses are personnel costs (2019: 84%) and the
average number of developers increased in the year by 22
to 156 employees (2019: 134 employees). In addition to the
increase in the average headcount, the personnel-related costs
have also increased due to the above inflationary pay rises that
were awarded in November 2019 as part of the Group’s overall
strategy to invest in its people.

As in prior periods, our development efforts centred primarily
on customer project development. In addition to this customer
development, for which the amounts are expensed in the profit and
loss, during 2020 a total of £0.7m (2019: £1.1m) of development
costs were capitalised. The key amounts capitalised related to
£0.3m in relation to enhancements of the Alfa user interface and
£0.1m in relation to the changes required to prepare Alfa for the
new interest rates such as SONIA and SOFR.

SG&A expenses increased in the year by £2.5m to £21.3m
(2019: £18.8m). This included increased salary costs through
strengthening some of the support functions; increases in the
share-based payment charges in 2020 to £1.3m (2019: £0.6m)
in relation to LTIPs granted in May 2018, November 2019 and
June 2020; and increased amortisation costs of £0.8m (2019: £0.4m)
reflecting the higher amounts of intangible assets capitalised over
the past two years. These increases have been partially offset
by the decrease in foreign currency differences of £0.8m, which
moved from a loss of £(0.3)m in 2019 to a gain of £0.5m in 2020.

Overall in 2021 we expect to continue to increase our headcount,
to see some bounce back in the circa £2m reduction in cost that
resulted from the Covid-19 lockdown, and also some increased
IT hosting costs as this business grows.

Finance costs
Net finance costs of £(0.7)m (2019: £(0.7)m) remained relatively
unchanged. Income on cash balances remained low given the
current low interest rate environment.

Profit for the period
Profit after taxation increased by £10.2m, or 100%, to £20.4m
in 2020 (2019: £10.2m). The effective tax rate decreased to
12.4% in 2020 against the effective tax rate for the 2019 year
end (2019 21.7%) primarily due to research and development
tax credits arising in respect of the 2018 and 2019 claims.
These claims were finalised during 2020.

Earnings per share
Basic earnings per share increased by 98% to 6.93 pence in 2020
(2019: 3.50 pence). Diluted earnings per share increased by 99%
to 6.79 pence (2019: 3.41 pence).

Cash flow
Net cash (including the effect of exchange rate changes) decreased
by £21.8m to £37.0m at 31 December 2020, from £58.8m at
31 December 2019. The most significant impact was the payment
of the special dividend of £44.2m on 6 November 2020. This more
than offset the increase driven by cash generated from operations
of £30.1m. In 2020 we received £3.6m of one-off licence revenue
items recognised during FY19 along with £4.5m from the five year
contract extension which was behind revenue recognition by
£1.4m. Continued focus on cash management by the Group saw
net change in working capital of £2.9m. Taken together, the Group’s
Operating free cash flow conversion (FCF) was 114% (2019: 138%).

In addition to the cash generated from operations of £30.1m,
the Group incurred £1.0m on capital expenditure (2019: £2.1m),
provided funding of £0.4m to its newly set up joint venture, Alfa
iQ, and made tax payments of £3.8m (2019: £4.1m) during the
period. The Group has no external bank borrowings.

In 2020 there were net cash outflows of £45.9m (2019: £1.6m)
from financing activities related to the principal element of lease
payments and the 15 pence per share special dividend, amounting
to £44.2m which was paid on 6 November 2020. No ordinary
dividends were paid during the year.

Operating free cash flow conversion
£m

Cash generated from operations

Adjusted for:

2020

30.1

2019

22.5

Capital expenditure

(1.0)

(2.1)

Principal element of the lease
payments in respect of IFRS 16

Operating free cash flow

Operating profit

(1.7)

27.4

23.9

(1.6)

18.9

13.7

Operating free cash flow conversion

114%

138%

Balance sheet
The significant movements in the Group’s balance sheet,
aside from the cash balance which is described above, from
31 December 2019 to 31 December 2020 are detailed below.

The trade and other receivables balance decreased by £0.2m
to £13.7m (2019: £13.9m). At the end of 2019 there had been
some delays in invoicing overseas customers and a higher accrued
income balance as a result of £3.6m from non-recurring revenue
items. Both of these issues were resolved in 2020 and the cash
collected. This improvement was offset by the impact of the

Alfa Financial Software Holdings PLC Annual Report and Accounts 202041

overall increase in revenue during 2020 and the increase in
accrued income of £1.4m from the five year right to use and
maintenance extension contract.

The trade and other payables balance increased by £2.2m to
£8.1m (2019: £5.9m) principally due to an increase in the sales
tax payable, including VAT and the overseas equivalents, of £0.8m
(largely as a result of increased customer invoicing activity in the
last two months of 2020 compared to the same months in the
prior year), an increase in the holiday pay accrual of £0.3m
reflecting the impact of fewer holidays being taken during the
year as a result of the pandemic and an increased in the bonus
accrual of £1.7m.

Contract liabilities have decreased by £1.6m to £7.0m (2019: £8.6m)
with a decrease in the deferred software implementation contract
liabilities of £2.6m, due to work progressing on the current software
implementation projects, being offset by a £1.0m increase in
deferred maintenance liabilities, reflecting the higher maintenance
revenues charged in the year.

Capital allocation and distributions
Alfa seeks to deliver high-quality visible earnings and future
earnings growth, and maintain a strong balance sheet. The Group’s
capital allocation policy includes the following elements aimed
at supporting the achievement of strategic objectives:

• Reinvestment in people and technology; and
• Maintaining strong liquidity.

Having reviewed the strategy of the business and the resources
required to support its growth, the Directors concluded that
there was excess capital in the Group and paid a special dividend
amounting to £44.2m in 2020 (2019: £nil). Looking forwards, the
business continues to be cash generative with a healthy net cash
balance and as a consequence the Directors concluded it was
appropriate to start a regular dividend programme, commencing
with proposing a final dividend of 1.0 pence per share for the 2020
full year, which will be paid in July 2021. The Board intends to
progressively increase the dividend as the Group grows, whilst
ensuring that we retain a strong balance sheet.

In making investment decisions regarding our people, the
Directors considered the Group’s financial performance and
position as well as investor and analyst feedback; dialogue and
feedback from employees, covering employee engagement
and retention rates; requirements for training and professional
development; and appropriate reward structures in the context
of the current labour market. The allocation of capital towards our
people will support the Group in achieving its strategic objective
to maintain a high-performance organisation with a culture of
continuous improvement.

In making investment decisions to develop our technology,
the Directors considered the Group’s financial performance
and position; the feedback and requirements of customers; the
operational efficiency of the existing technology; and the efficacy
and expected return on investment of certain development and
enhancement work. The allocation of capital to technological
development will support the delivery of our strategic objectives
to grow market share, to extend our best in class digital agenda,
and to promote and grow value and develop resilience.

Related party transactions
The ultimate parent undertaking is CHP Software and Consulting
Limited (the ‘Parent’). There was no trading between the Group
and the Parent. There were no balances outstanding from, or to,
the Parent at 31 December 2020 and 31 December 2019.

Going concern
The financial statements are prepared on the going concern basis.
The Group continues to be cash generative and the Directors
believe that the Group has a resilient business model. The Group
meets its day-to-day working capital requirements through its
cash reserves generated from operating activities. The Group’s
forecasts and projections, taking account of reasonably possible
changes in trading performance including the possible impacts
of Covid-19, show that the Group has sufficient cash reserves
to continue to operate for a period of not less than 12 months
from the date of approval of these financial statements.

The going concern assessment also includes downside stress
testing in line with FRC guidance which demonstrates that even
in the most extreme downside conditions considered reasonably
possible, given the existing level of cash held, the Group would
continue to be able to meet its obligations as they fall due,
without the need for substantive mitigating actions.

On this basis, whilst it is acknowledged that there is continued
uncertainty surrounding the future impacts of Covid-19, the
Directors consider it appropriate to continue to adopt the going
concern basis of accounting in preparing the financial statements.

Viability statement
The viability statement containing a broader assessment
by the Board of the Company’s ongoing viability, which also
includes consideration of the impact of Covid-19, is set out
in the Strategic report on pages 50-51.

Subsequent events
There have been no reportable subsequent events since the
balance sheet date.

Duncan Magrath
Chief Financial Officer
22 March 2021

Key financial metrics
The Group uses a number of key financial metrics which are not
specifically defined by IFRS but which management use as key
measures to assess financial performance. Previously Adjusted
EBIT and Adjusted EBIT margin had been used by management
to monitor performance. The differences between these measures
and the equivalent IFRS measures was becoming relatively small and
so the use of these alternative financial metrics has been stopped.

Operating cash flow conversion is monitored by management and now
that the adjusted EBIT measure has been dropped this is calculated
as cash generated from operations as a percentage of operating profit.

These measures are not directly comparable to similarly referenced measures
used by other companies and, as a result, investors should not consider these
performance measures in isolation from, or as a substitute analysis for, our
results of operations as determined in accordance with IFRS.

New customer revenue
New customer revenue comprises revenue generated by customers
who have not previously generated revenue in the applicable segment
in the prior year.

Constant currency
We provide percentage increases or decreases in revenue and operating
profit to eliminate the effect of changes in currency values as we believe
it is helpful to the understanding of underlying trends in the business.
When trend information is expressed herein ‘in constant currencies’, the
comparative results are derived by re-calculating non-pound sterling
denominated revenue and/or expenses using the average monthly
exchange rates of this year and applying them to the comparative year’s
results, excluding gains or losses on derivative financial instruments.
The average rates are as shown in note 1.4 to the financial statements.

Strategic reportGovernanceFinancial statementsOther information42

R I S K M A N A G E M E N T

Our aim is to foster a culture of effective risk
management by encouraging appropriate and
monitored risk-taking and innovation.

Introduction
2020 has been a year of unprecedented
external events, with the Covid-19
pandemic having widespread social
and economic impacts across all of Alfa’s
operating regions. Layered on top of this
was the complicated US political situation,
and the uncertainty around the eventually-
concluded Brexit trade deal negotiations.
During these uncertain times Alfa’s risk
management framework has provided us
with a solid basis for assessing, preparing for
and reacting to these types of challenges.

As the Covid-19 situation developed in
Q1 2020, we were in the fortunate position
of being well prepared to execute our
pandemic plan. Our Covid-19 Incident
Response Team worked closely with the
Company Leadership Team (CLT) to
identify, control and mitigate risks as
they arose. Their activity has continued
throughout 2020, and we will continue
to react proactively to the situation as it
unfolds throughout 2021, doing our part
to ensure the safety and wellbeing of our
employees, customers and their families,
and to minimise the risk to our operations.

Risk management is integral
to our strategic objectives
The events of 2020 have demonstrated
the interconnectedness of many of the risks
and opportunities that our business faces.
In order to deliver our strategy and achieve
excellence through our business model,
both operationally and financially, we must
make sure that we maintain the right balance
between safeguarding against potential
risks, and taking advantage of potential
opportunities as they arise. Our aim is to
foster a culture of effective risk management
by encouraging appropriate and monitored
risk-taking and innovation, in order to
achieve the Group’s strategic priorities.

Our strategic priorities as set out on
pages 22 and 23, are to:

• Maintain our differentiation of market-
leading People, Product and Delivery;
• Focus on Cloud Hosted Sales to target
markets as an engine for revenue growth;

• Enable more concurrent Alfa

implementations more efficiently,
with a higher margin, by: Simplifying
our product; Simplifying our
implementations; Simplifying our
processes across our organisation;
• Develop our Partnership network, to

improve sales opportunities and enable
more concurrent Alfa implementations;
• Volume Market – improve our offering
for smaller asset finance providers as a
platform for innovation and to increase
our reach within our industry.

How we monitor risk

Identify risks
Whilst overall responsibility for risk lies at the Board level, the
Directors have delegated authority for risk identification to the CLT.

A bottom-up approach has primarily been undertaken to provide
a detailed review of risks by relevant business owners and this is led
by the Risk Officer, twice a year. The output is then reassessed by
the CLT to provide assurance over completeness of the risk register.

Define risk appetite
Our systems and processes are designed to manage our exposure to
risk rather than eliminate the risk completely. Therefore the Audit and
Risk Committee, with the CLT, will reassess the Group’s risk appetite
each year with this in mind. The Audit and Risk Committee will consider
the risks associated with the conduct of our business and the delivery
of our strategy, assessing the risks we are exposed to and evaluating
whether this exposure is acceptable given the likelihood and severity
of the risk.

Assess and quantify
Risks are assessed to understand the likelihood and the impact
of the risk crystallising. We assess risk across our business areas,
and we analyse their impact across these categories:

• Financial
• Operational
• Reputational
• Legal and regulatory

Respond, manage and mitigate
Each risk is reviewed, twice a year. At each review date, the existing
controls are reviewed for adequacy and effectiveness. Due to the
ever-changing business landscape and the industry we work in,
it is quite possible for the control requirements to change and
for processes and policies to require updating. If this is the case,
then a business owner is identified and they are responsible for
implementing changes.

Monitor and review
Management monitors progress against the principal risks. This is
shared with our internal auditor, BDO, to assist with forming the
internal audit plan for 2021. The Board reviews the summary risk
register and assesses the adequacy of the principal risks identified,
as well as the mitigating controls and procedures which are in place
and are operational.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202043

Our risk management framework
Our risk management framework is
designed to be flexible and proactive,
and links tightly into our operations
and decision-making, allowing us to
react with speed and agility to new
and evolving risks as they arise across
all of our business areas. This has helped
us in 2020 to continue to progress our
strategic objectives, and to identify
and pursue opportunities as they arose.

We recognise that managing risk
effectively is integral to executing
our strategy. We have therefore
implemented a five-step process
for monitoring and managing risk
throughout our business, allowing
the Directors to conduct a robust
assessment of the principal risks
facing the Group. Risk is not something
that should be eliminated but, instead,
identified, assessed and managed
in a timely manner.

Responsibilities

Creating the right corporate culture
for effective risk management
Our organisation has an open and
accountable culture, led by our experienced
CLT, whose members have many years of
experience in their areas. The Board and the
CLT set the tone for our risk management
activities, embedding risk consideration
and assessment into the culture within the
organisation. Ownership and accountability
for risks is an integral part of our risk
management framework.

The Board has overall responsibility for
the governance of risks, ensuring we have
adequate and effective systems in place
and setting the tone for our risk culture.
It does this in various ways:

• Risks are considered by the Board as an
intrinsic part of our strategic planning,
and in the consideration of new
opportunities – risk is recognised as an
inherent part of each opportunity, and is
assessed together with the opportunity.

• There is a twice-yearly review by
the Audit and Risk Committee of
principal risks, their evolution, and
consideration of emerging risks.
• The CLT members are the owners
for each risk in the Corporate Risk
Register, and they, and their teams,
are responsible for the identification,
assessment and treatment of the risks
in their own areas. Risk management
is thus embedded into each area of
the business, which is best placed to
progress the actions and mitigations.

• The Risk Officer coordinates risk

management activities and collates
the risks into the Corporate Risk
Register. The Risk Officer is an advocate
for best practice across the organisation.
• Risk assurance is achieved through our
external and internal audits as well as
through our attainment of ISO27001
and ISO27018 certifications, and
through our SOC2 Type 2 audit.

• Defines the risk governance framework, risk culture and principles
• Sets the tone for risk management including risk appetite

• Responsible for an effective system of internal controls
• Approves risk decisions that are beyond delegated authorities

Board

Audit and Risk Committee

CEO and CLT

• Reviews the risk management framework and the effectiveness of
internal controls, risk management systems and major risk initiatives

• Reviews and challenges the principal risks in the risk register, and

risk scores

• Reviews the internal audit programme and reports

Risk Officer and CFO

• Responsible for collating updates, managing the risk register

and presenting principal risks and uncertainties to the Company
Leadership Meeting and Audit and Risk Committee

• The Risk Officer acts as an advocate for risk management across

all levels of the business

• The Risk Officer reports to the CFO in relation to risk

management matters

• The CFO has responsibility for governance and risk management review

• Review the risk management framework and the effectiveness of

internal controls, risk management systems and major risk initiatives
across the Group

• Review the risk profile against risk appetite and make recommendations

to Board in relation to risk profile, strategy and key controls

• Review and challenge the risk register, and risk scores
• Review the sustainability of risk methodologies, metrics and policies
• Assess major risk-related projects
• Assess new commercial arrangements through participation in the

Deal Committee

Operational management

• Assesses for new risks, updates on current risks assessment and

implements mitigation strategies and actions

• Be alert to risks associated with the activities that they perform

• Report inefficient, unnecessary or unworkable controls

All employees

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44

P R I N C I P A L R I S K S A N D U N C E R TA I N T I E S

Principal risk analysis (including mitigating activities)

y
t
i
l
i

b
a
b
o
r
P

Impact

Risks

A Socio-economic and
geo-political risk

D High customer

concentration risk

B Pandemic outbreak in
Alfa and/or customer
geographies

C Risk to people, skills,
location and working
environment

E IT security and cyber risks

F Business interruption

or continuity

Acceptable risk appetite

Our risk appetite
Our risk appetite provides us with
guidance on the levels of risk we are
prepared to take in pursuit of our
objectives, and is considered a
fundamental part of the planning and
execution of our strategy. In March 2021,
the Board, assisted by the Risk and Audit
Committee and the CLT, assessed and
updated our risk appetite in light of the
developing in-year and emerging risks.

We take a cautious approach to risk,
aiming to operate in a manner that would
not put the business at risk of significant
financial, operational or reputational
damage. This risk appetite has shaped
our response to the Covid-19 pandemic
as it evolved through 2020, forming
the basis of our approach to protecting
our employees, our customers and our
deliverables to our customers.

Focus for 2021

Continuous improvement of risk
management procedures, including
training and awareness within the
Company of our risk management
best practices.

Risk identification and assessment
– bi-annual risk reviews including
assessing actions and control reviews.

Cyber security and data protection –
Maintain SOC2 Type 2 and ISO programme
compliance, and continue to assess and
strengthen our cyber security defences.

Business continuity and disaster recovery
– scenario testing exercises, and reflecting
on best practice based on experience
from Covid-19.

Internal audits – we plan to perform
reviews of various financial and IT
controls, amongst others.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202045

Principal risks and uncertainties
in more detail
The Group faces a number of risks that
may adversely affect our strategic and
business objectives, operations, liquidity,
financial position, reputation or future
performance, not all of which are wholly
within our control or known to us. Some
such risks may currently be regarded
as immaterial and could turn out to
be material. We accept that risk is an
inherent part of doing business.

The Board consider the following matters
to be the principal risks and uncertainties
(in no specific order) affecting our business
at this time.

Our strategic priorities

People – Maintain our differentiation
of market-leading People.

Product – Maintain our differentiation
of market-leading Product.

Delivery – Maintain our differentiation
of market-leading Delivery.

Sales – Focus on Cloud Hosted sales
to our target markets as an engine
for revenue growth.

Simplification – Enable more
concurrent Alfa implementations,
more efficiently, with a higher margin,
by: Simplifying our product; Simplifying
our implementations and Simplifying
our processes across our organisation.

Partnerships – Develop our partner
network, to improve our sales
opportunities and to enable more
concurrent Alfa implementations.

Volume Market – Improve our offering
for smaller asset finance providers as a
platform for innovation and to increase
our reach within our industry.

Risk A – Socio-economic and geo-political risk

Links to strategic
priorities:

Movement:
Increased probability

Impact:
Major

Probability:
Likely

How does it impact us?
There is considerable uncertainty in the
global economic outlook, as well as in each
of our operating regions. This is caused
and exacerbated by current and emerging
factors such as:

What are we doing to manage the risk?
Despite the uncertain outlook, we have
attracted continued interest from sales
prospects throughout 2020, from diverse
geographies and sectors within the asset
finance industry.

• The unprecedented events surrounding the
Covid-19 pandemic may have short or long
term economic impacts on our customers,
potentially leading to a reduction in our
addressable market. These economic
impacts are included under this principal
risk, whereas the health and wellbeing,
and business continuity aspects are
included in Risk B – Pandemic outbreak
in Alfa and/or customer geographies;
• Any impacts due to economic policy of

a new US administration; and

• The change in trade relationships between
the EU and the UK following the end of
the Brexit transition period.

Alfa specialises in providing software
and services to the asset finance sector.
Changes in economic conditions and
unforeseen external events, such as political
instability, international trade uncertainties,
inflation and other unforeseen events may
put pressure on the profitability of the players
in this market. This in turn may decrease the
amount they have to spend on improving their
internal systems and processes or may extend
the decision-making when contemplating a
new asset finance system.

Our strategy includes continuing to build
a diverse customer base, both geographically
and by asset type (i.e. automotive, equipment)
but also by type of customer (i.e. banking,
OEM or independent) which therefore
have different and often contrasting risk
characteristics. This mitigates some of this
risk as there is often a degree of cyclicality
in trends affecting the asset finance industry.

This risk goes hand-in-hand with opportunity,
as our customers may seek to adapt to the
changing economic environment, seeking
operational efficiency, introducing new
products or reacting to regulatory changes.
Alfa is well placed to help with the system and
process changes needed for such adaptation,
either where Alfa Systems is the incumbent
system or where a new system is needed.

We ensure that the Group is financially
robust and resilient to economic downturns,
or project pauses, by retaining cash reserves
and collecting maintenance and licence
revenues in advance.

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P R I N C I P A L R I S K S A N D U N C E R TA I N T I E S C O N T I N U E D

Risk B – Pandemic outbreak in Alfa and/or customer geographies

Links to strategic
priorities:

Movement:
Decreased level of risk

Impact:
Moderate

Probability:
Likely

How does it impact us?
The Covid-19 pandemic has developed
considerably during 2020, and at the time of
writing a variety of government restrictions are
in place across our regions attempting to restrict
the spread of the disease. Whilst distribution
of vaccines by public health organisations has
begun, it will likely take considerable time for the
situation to return to normal – for example, for
lockdowns to be relaxed and for travel to resume.

The risks relating to the current pandemic are
intertwined with other principal risks, notably
Risk A – Socio economic and geo-political risk,
and Risk C – Risk to people, skills, location and
working environment.

We have reassessed the level of this risk, and
have concluded that the business continuity and
health and wellbeing risks have decreased over
the last year, due to the strong actions we have
taken in adopting remote working, and the
external actions taken to tackle the pandemic.

Whilst this pandemic continues to develop,
we face a number of possible impacts:

• The health and wellbeing of our employees,
their families and other stakeholders may
be impacted. Mitigating this is of critical
importance in shaping our response to
this risk.

• We may experience significant infection
levels at the peak of the virus outbreak.
This could temporarily reduce the
resource capacity of our business and
our professional services fee earning
capacity, potentially resulting in
deferred or lost revenue.

• Similarly, customers and potential

customers may become temporarily
resource-constrained, limiting their
capacity to manage large-scale IT projects
and run sales processes, respectively.

• Travel is being restricted by our own policy,
customer policy and government policy,
and this may temporarily reduce, or be
perceived to reduce, our ability to operate
for some of our geographically diverse
customer sites.

• Remote working relies on third party

cloud-based services such as video calling
and chat software. Such services may
experience problems during peak remote
working times, impacting the efficiency
of our employees.

• We may experience a slowdown in supply

for our IT equipment needs.

• The pandemic may have short or long-

term economic impacts on our customers,
potentially leading to a reduction in our
addressable market. This is discussed in
more detail in Risk A – Socio-economic
and geo-political risk.

What are we doing to manage the risk?
We have continued to adapt our pandemic
response throughout 2020, and into 2021,
following our established and rehearsed
pandemic response plan.

Our Incident Response Team (IRT) manages
and coordinates our actions relating to the
pandemic. This team is chaired by our Chief
People Officer, and contains representatives
from across our business units and geographies.

The IRT monitors expert and government
advice in each of our operating regions,
and takes timely action on that advice.

We made an early move to remote working,
during March 2020, as part of the activation of
our pandemic plan. Remote working was already
an established practice in our organisation, with
the majority of our employees, including all of
our consultants and engineers, using laptops,
remote connections and remote working tools.
We tested the capacity and resilience of these
tools before instructing employees to work
remotely, and our systems have functioned
well with the increased remote working load.

The IRT and other internal teams communicate
regular guidance and advice to our employees,
including on their working location, working
environment and wellbeing. We have an active
programme of employee wellbeing events, and
we recognise the importance of supporting and
engaging with our employees whilst they are
working remotely.

We regularly liaise with our customer organisations
to ensure that we abide by their policies – for
example, with respect to business travel, and to
ensure that they are satisfied with the service
they are receiving from our remote teams.

Our essential customer services – Alfa
support, Alfa Hosting and Technical
Operations – are run by globally-distributed
teams, using cloud infrastructure, providing
resilience against business continuity risks.

The providers of our key remote working tools
have confirmed and demonstrated throughout
2020 that they have suitable business
continuity and capacity planning in place.

We have taken many actions to improve
the efficiency of supply of our IT equipment.
For example, we have implemented more
efficient processes for delivering and setting
up new laptops where needed (for new or
existing employees), with delivery directly
from suppliers to the recipient. We are
carefully managing the stock levels held with
our IT supplier, and are actively monitoring
lead times.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020

Risk C – Risk to people, skills, location and working environment

Links to strategic
priorities:

Movement:
Same level of risk

Impact:
Moderate

Probability:
Likely

How does it impact us?
Our business is heavily dependent on our
people because they are integral to the
development and delivery of Alfa Systems.

The health, wellbeing and security of our
employees is of utmost importance to our
organisation. We work in geographically
diverse locations, and our employees may
be at risk from external factors, such as the
impacts of the Covid-19 pandemic, and the
safety and security in each region. This impact
is intertwined with Risk B – Pandemic outbreak
in Alfa and/or customer geographies.

A failure to attract, train and retain high quality
individuals in our key operating regions may
limit our ability to deliver implementations,
maintain product quality and leading-edge
functionality, manage customer relations
and deliver on our strategic plan.

As our global reach expands and opportunities
arise in new regions, we may find it difficult
to provide employees across geographically
diverse customer sites. This has the potential
to have an impact on our ability to deliver
implementation services to our customers.

What are we doing to manage the risk?
In 2020 our HR team has run an active
programme of employee wellbeing events,
and we recognise the importance of supporting
and engaging with our employees whilst they
are working remotely.

Employee engagement surveys are carried
out every two months, and allow areas for
improvement to be identified and acted upon.

We have seen an improvement in our employee
retention figures in 2020. Our employee
surveys indicate that our proactive response
from leadership to the Covid-19 epidemic
has been a significant contributing factor in
employee satisfaction, and this has helped
to improve employee retention.

We benchmark our remuneration levels
against relevant roles in the industry and
aim to be competitive.

Recruitment of graduates and experienced
hires is continuing, using a diverse number
of sources, searching for candidates from
varied backgrounds and ethnicity and with
varied core skills.

Alfa Partnering provides a strong and
growing network of professional services
partner organisations, who have extensive
established geographical presence. This
provides us with resourcing flexibility,
and wider geographical coverage, and
is key to our strategy to decouple our
growth from our own headcount.

The move to remote working in 2020, in
response to the Covid-19 pandemic, has
helped us to redistribute work, where this
is efficient, between locations. Many of
our teams are already globally-distributed,
allowing us to cover more regions and time
zones effectively. By its very nature, remote
working is an effective mitigation against the
risk of not being able to provide employees
in geographically diverse customer sites.

We have an established presence in our
key strategic markets in Europe and the
USA. We have actively recruited on both
continents in 2020, and this continues
in 2021. Continued recruitment of EU
citizens is important to us following
Brexit, allowing us more opportunity
for expansion in the EU bloc.

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P R I N C I P A L R I S K S A N D U N C E R TA I N T I E S C O N T I N U E D

Risk D – High customer concentration risk

Links to strategic
priorities:

Movement:
Same level of risk

Impact:
Major

Probability:
Possible

How does it impact us?
• Alfa specialises in providing software and
services to the asset finance sector. At the
core of our customer base are large corporate
players in this industry.

• We have significant customer-concentration
risk due to the size and duration of the
software implementation projects for these
large corporates. If one, or more, of our
key customers pauses, or terminates their
implementation activities, there is a risk
of a material impact on revenue targets.
• Such a pause or termination is a possible

impact of other principal risks, such as Risk A
– Socio-economic and geo-political risk, or
Risk B – Pandemic outbreak in Alfa and/or
customer geographies.

Risk E – IT security and cyber risks

Links to strategic
priorities:

Movement:
Slightly increased risk

Impact:
Major

Probability:
Possible

How does it impact us?
• Our systems, networks and products may
be subject to cyber attacks, specifically
designed to disrupt our business, obtain our
intellectual property or data, or harm our
reputation. Such a security breach could
impinge upon our ability to operate our
business, including our ability to continue
providing support to our customers.
• Our Alfa Hosting offering stores our
customers’ data on third party cloud
hosting platforms. A security breach in
our Alfa Hosting offering could result
in compliance violations, identify theft,
malware infections, diminished customer
trust and loss of revenue.

• The frequency of cyber attacks against IT
companies rose in 2020, with a number
of high-profile incidents impacting other
companies. Consideration of this trend,
which has continued in 2021, has led us to
increase the probability of such an attack
impacting our business. Considering the
mitigations we have in place, and the fact
that attacks experienced are usually of a
lower impact than a theoretical worst case
scenario, the impact of this risk has been
lowered. The net effect of these two
changes is that we consider this risk
to have increased slightly.

What are we doing to manage the risk?
We continue to build a diverse customer base,
both geographically and by asset type (i.e.
automotive, equipment) but also by type of
customer (i.e. banking, OEM or independent)
which therefore have different and often
contrasting risk characteristics.

We have had further diversification success
in 2020 and early 2021 by targeting smaller
organisations, with our Alfa Start product
designed for this sector.

Initiatives such as Alfa Partnering allow us to
take on more concurrent implementations,
thus reducing this risk.

We ensure that the Group is financially
robust and resilient to economic downturns,
or project pauses, by retaining cash reserves
and collecting maintenance and licence
revenues in advance.

Nevertheless, we accept that a significant
focus on large corporates in our industry is
inherent in our strategy, and so there is an
element of this risk which is accepted.

What are we doing to manage the risk?
Our internal IT and cyber security team
monitors key security and cyber risks, assesses
and monitors the control framework of our key
technology suppliers and undertakes day-to-
day monitoring of IT security incidents.

We implement continual improvements in
our IT security environment and maintain
an annual education and training programme
for all staff.

We have maintained our SOC2 Type 2,
ISO27001 and ISO27018 compliance in 2020.

Where we provide Alfa Hosting services,
using third party cloud hosting suppliers,
we have a continuity plan in place to transfer
our customers’ data to a similar supported
environment should the services not
be available.

Our customers perform thorough assessments of
the security of the Alfa Hosting platform during
their system selection and implementation
process, measuring our IT security and data
protection processes and controls against
their own, typically stringent, internal policies.
These compliance checks sit alongside our
own policies and procedures, and provide
independent assurance for our customers
that appropriate security controls are in place.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020

Risk F – Business interruption or continuity

Links to strategic
priorities:

Movement:
Same level of risk

Impact:
Major

Probability:
Unlikely

How does it impact us?
We are at risk of disruption to our day-to-day
operations if there is a disaster incident which
causes our internal IT systems to fail or we
do not have access to our office space.

A failure to be able to use key IT systems
or access our infrastructure could lead to
a failure to deliver maintenance services to
our customers and therefore have a negative
reputational impact.

Note that the risk that Covid-19 poses to us,
and our readiness for this, is given specific
focus as Risk B – Pandemic outbreak in Alfa
and/or customer geographies.

What are we doing to manage the risk?
We have an established, detailed and
tested incident management procedure
and escalation process.

We have a disaster recovery and business
continuity plan which is reviewed and
tested annually.

Our SOC2 Type 2 reporting and complete
fail over testing has identified no significant
required remedial actions.

Where we provide Alfa Hosting services,
using third party cloud hosting suppliers,
we have a continuity plan in place to
transfer our customers’ data to a similar
supported environment should the services
not be available.

Our response to Brexit
Brexit negotiations continued
throughout 2020, beginning with the
start of the transition period when the
UK left the European Union (EU) on
31 January 2020. The transition period
then ended on 31 December 2020, with
the UK and the EU having finalised the
Trade and Co-operation Agreement.
Throughout this period of uncertainty,
we actively monitored and prepared for
Brexit, considering the various possible
outcomes, analysing the effects they
would have on our business and people,
and determining the actions we needed
to take in preparation. We formed a

Brexit Task Force, responsible for
taking action across all impacted
areas of our business, and sought input
from external advisors on specialist
topics. Our internal auditor, BDO, was
engaged, which provided assurance
over the progress we had made to
prepare for the end of the transition
period and concluded that we had
taken an appropriate and proportionate
approach. As a result of these actions,
we are ready and committed to
continuing to serve our customers
and prospects in the EU and globally.

The Group does not consider that
the residual effects of Brexit give
rise to a principal risk. We have
considered the changed political
and economic landscape within which
we will be operating, and the effects
of this are incorporated into Risk A
– Socio-economic and geo-political risk.

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V I A B I L I T Y S TAT E M E N T

In accordance with the UK Corporate Governance
Code, the Board has addressed the prospects and
viability of Alfa.

Assessment of prospects
Alfa is one of the leading providers of
software to the asset finance industry
and it is the Group’s clear focus to
increase its relatively small market
share in this space by:

• Maintaining differentiation of market –
leading People, Product and Delivery;
• Focusing on Cloud Hosted sales to our
target markets for revenue growth;

Assessment period and process
The business model and strategy as
set out on pages 18 to 19 and 22 to 23
are central to an understanding of the
Group’s prospects. These inputs provide
a framework for assessing the Group’s
prospects and viability.

The three-year timeframe for assessing
both prospects and viability is considered
to be appropriate because:

• Enable more concurrent Alfa

implementations, more efficiently,
with a higher margin;

• It reflects reasonable expectations in
terms of the reliability and accuracy of
operational forecasting models; and

• Developing our partner network, to

improve sales opportunities and enable
more concurrent Alfa implementations;
and

• Improving our offering for smaller asset
finance providers to increase reach.

• Projections looking out beyond
three years become significantly
less meaningful in the context of
the fast-moving nature of the asset
finance industry and the software
and technology landscape.

During the year ended 31 December 2020,
the Group generated profit before tax
of £23.2m and, excluding the payment
of a £44.2m special dividend in the year,
was cash generative with net cash
generated from operating activities
amounting to £25.6m.

Taking into account the Group’s
current position and its principal risks
and uncertainties as described on
pages 44 to 49 of this Annual Report,
the Directors have assessed the Group’s
prospects and viability.

The Group’s prospects are assessed
primarily through its annual planning
process, led by the CEO with the CLT.
All relevant functions are involved,
including finance, sales, recruitment
and resourcing, and commercial.

The Board participates fully in the annual
process and has the task of considering
whether the plan appropriately takes
into account the external environment,
including technological, social and
macroeconomic changes, as well as the
risks and uncertainties of the business.

The output of the annual review process
includes the annual financial budget and
an analysis of the risks which could prevent
the plan being delivered. Detailed financial
forecasts which include profit, cash flow and
key financial ratios have been prepared for
the three-year period to December 2023.

The Group’s 2021 budget forms the first
year of the financial forecast and is subject
to a reforecast process each quarter.
The second and third years are prepared
in detail based on the Group’s three-year
strategic planning process and are flexed
based on the actual results in the first year.

Assessment of viability
The Board’s assessment of the Group’s
prospects, as described on this page,
has been made with reference to current
market conditions and known risk factors,
including the possible impacts of the
Covid-19 pandemic, as described in
principal risks and uncertainties on
pages 44 to 49.

Whilst the pandemic has brought about
significant economic uncertainty and has
led to the majority of Alfa’s service delivery
being provided remotely, there has been
a limited effect on the Group’s ability
to deliver services and to convert and
contract for new opportunities to date.

The Board has considered the Group’s
financial performance in 2020, particularly
in the context of the Covid-19 pandemic,
and the risk factors noted above and
consider that the key risks which could
impact the delivery of the Group’s
financial objectives are as follows:

• Deterioration of the pandemic
situation causing projects to be
delayed or cancelled;

• Socio-economic or geo-political risks
impacting conversion of the sales
pipeline and/or spending by existing
customers; and

• Loss of significant customers.

The Directors also reviewed the outputs
of two alternative scenarios described on
page 51 which were produced to model the
effect on the Group’s liquidity and solvency
of severe but plausible combinations of the
principal risks and uncertainties affecting
the business.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202051

Scenario 1 – Includes
significantly reduced
conversion of sales pipeline
Includes significantly reduced
conversion of sales pipeline and
ongoing spend by existing customers.

The level of recruitment and uplifts
in salaries are reduced in this scenario,
along with reductions in discretionary
spend associated with personnel,
partners and travel.

No other mitigating actions are
required in this scenario.

Scenario 2 – Includes loss
of significant customers,
major project cancellations
and significantly reduced
conversion of sales pipeline
Includes significantly reduced conversion
of sales pipeline, cancellation of major
ongoing implementation projects,
significant loss of customers resulting
in termination of existing maintenance
agreements and significantly reduced
ongoing spending by remaining customers.

Reductions in recruitment and other
cost areas are required of a similar
nature to scenario 1, but more
extensive in quantum.

No other mitigating actions are
required in this scenario.

Conclusion
It was determined that none of the
individual risks would, in isolation,
compromise the Group’s viability.

Scenario 2 is more severe than Scenario 1
and reflects the combination of all risk
factors identified and is considered a ‘worst
case scenario’. The Directors consider that
this scenario addresses the key risk factors
outlined above, including deterioration of
the Covid-19 pandemic situation.

Based on the current assessment of the
Covid-19 situation and the limited effects
on the business and commercial outlook to
date, Scenario 2 is considered extremely
severe and has been prepared for the purpose
of creating outcomes that have the ability
to threaten the viability of the Group.

In the case of such a scenario crystallising
the Group would be required to take
some mitigating actions largely related to
the level of headcount in the business, the
level of partner usage and discretionary
spending. In addition, there are many other
different levers that could be pulled to
further minimise the financial impact and
maintain liquidity to continue in operation.

Revenue and profitability are clearly
affected in these alternative scenarios,
however, based on the Group’s existing
cash reserves, combined with incremental
cost reduction measures, the business
would retain sufficient cash reserves to
continue in operation throughout the
three-year forecast period, with the
lowest cash balance modelled in this
period of £32.4m.

Whilst it is acknowledged that there is
continued uncertainty surrounding the
future impacts of Covid-19, based on
the assessment of prospects and viability,
the Directors confirm that they have
a reasonable expectation that the Group
will be able to continue in operation
and meet its liabilities as they fall due
over the three-year period ending
31 December 2023.

Strategic reportGovernanceFinancial statementsOther information52

S E C T I O N 1 7 2 S TAT E M E N T

The Board of Directors of Alfa has always taken decisions for the long term, and collectively and individually
our aim is always to uphold the highest standards of conduct.

A broad range of stakeholders are
important to the Group at local,
regional and functional levels. Day-to-day
engagement with our key stakeholders,
and other local stakeholder groups, is
conducted at the business level and in
a format best suited to the context.
This may be locally, regionally or
functionally, by the Board or senior
management, depending on the

stakeholder. Where the Board does not
engage directly with our stakeholders,
it is kept updated so Directors maintain
an effective understanding of what matters
to our stakeholders and can draw on these
perspectives in Board decision-making
and strategy development. As the Board
receives presentations and makes decisions,
we ensure that the long-term impact on
any of these groups is considered.

We periodically review which are our key
stakeholder relationships and examine
how we engage with them. We also consider
ways to ensure that we maintain open lines
of communication with those stakeholder
groups and whether there are ways that
the Board’s engagement can be improved
to help us operate more effectively.

Setting the right tone
from the top

Board information

Section 172 factors considered in
the Board’s discussions on strategy,
including how they underpin
long-term value creation

The Board ensures that there
is proper consideration of the
potential impacts of its decisions

Board strategic discussion

The Board ensures section 172
factors are taken into consideration
in its decision-making

The Executive team provides
information on a timely basis and
assurance where appropriate

Board decision

The Board is provided with
updates and information on the
outcomes of its decisions

Actions taken as a result of
Board engagement and dialogue
with key stakeholders

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020H O W W E E N G A G E W I T H O U R S TA K E H O L D E R S

The Board is responsible for leading stakeholder
engagement, ensuring that we fulfil our
obligations to those impacted by the business.

Engagement with our shareholders and wider
stakeholder groups plays a vital role in Alfa’s
business. Alfa’s key stakeholders are set out below.

We believe that considering our
stakeholders in key business decisions
is not only the right thing to do, but is
fundamental to our ability to drive
value creation over the longer term.
In this section we identify our five key
stakeholder groups and have provided an
overview of their interests, their concerns
and the ways in which the Board acted
with regard to these groups when taking
its key strategic decisions throughout the
year and what the Board has learned from
these interactions, having regard (among
other matters) to the factors set out in
section 172(1)(a) to (f) of the Companies
Act 2006. The Board will sometimes
engage directly with certain stakeholders
on particular issues, but the size and
distribution of our stakeholders and of
Alfa means that stakeholder engagement
often takes place at an operational level,
within the context of the Board’s agreed
strategy. In this section we show how
the Board engaged with each of our
key stakeholder groups, summarise the
specific actions we took for stakeholder
groups in response to the Covid-19
pandemic and set out some case
studies which give more detail of how
our stakeholders are considered when
making specific decisions.

Link to business model
page 18

Link to risks
page 44

Customers

Our customers are central to our business and without
them we would not exist. We aim to deliver our leading
edge technology making our customers future-ready.

How the Board engaged
The Board receives an update on existing and potential
customers throughout the year. As part of the Board
strategy day, we looked at our customer needs and the
Board considered how we could potentially diversify
our customers when discussing strategic opportunities.

The impact of Covid-19 on our ability to meet the needs of
our customers and how this was addressed was discussed as
part of the broader Covid-19 response debate. Identifying our
customers’ needs, alongside changing market dynamics and
regulations, allows us to identify opportunities for Company
growth and to focus our product research and development
such that it will produce innovative and functional solutions
for the asset finance industry.

Outcome of engagement
Our customers have direct channels to engage with all levels
of the organisations, including providing feedback via user
groups in both EMEA and the US, chaired by a customer
representative. During the pandemic, we continued to build
on our long-term relationships with our customers. This is key
to developing our leading-edge technology and increasing
customer loyalty, which in turn enables us to win new business.

Engagement in 2021
Looking ahead, the challenge is to ensure that the systems
evolve and the technology we use continues to meet the
demands of our customers. We will continue to explore new
business methods and how we can innovate new technologies
to improve the customer journey and develop our ongoing
relationships with customers.

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H O W W E E N G A G E W I T H O U R S TA K E H O L D E R S C O N T I N U E D

Employees

Communities

Partners

Investors

Our talented and engaged employees are committed
to upholding our values, enabling us to deliver our
strategic priorities. We recognise that listening to
our employees and keeping them engaged is essential
to our success.

As a long-term sustainable business, we want
to maximise our social value, whilst reducing our
impact on the environment. Our culture is based on
individual accountability. We encourage employees
to support and engage with the local community.

How the Board engaged
Workforce engagement continues to be a key priority for the
Board. Vicky Edwards, the Chief People Officer, attends Board
meetings once a year to provide an update on all HR initiatives,
while Matthew White the COO, updates the Board with an
HR dashboard, showing key statistics and Pulse survey results
are reviewed at each Board meeting. Our employee opinion
survey formally captures their views and is a key part of how
we track engagement. In response to the challenges raised by
the pandemic, we held a number of live events via Zoom led by
the Company Leadership Team and a town hall with the Board.

How the Board engaged
The Board endorses the encouragement of our employees to
contribute to the community and the environment through the
provision of their time and expertise. This includes supporting
local schools and charities through Company led activities and
Company matched monetary donations.

We are dedicated to reducing our environmental impact and
continually improving our environmental performance as an
integral part of our business strategy and operating methods,
with regular review.

Feedback, suggestions and concerns from employees across
the business are also considered through channels such as
town hall meetings and CLT questions and answers sessions.

Outcome of engagement
Our employees are proud to work at Alfa and we are proud
of Alfa’s response to Covid-19, we did not furlough any staff
and provided funds to support home working. Following their
appointments, both Adrian Chamberlain and Charlotte de
Metz published video messages to introduce themselves to
our employees and provide an overview of their experience.

Outcome of engagement
The Board aims to contribute positively to the communities
and environments in which Alfa operates. The Board supported
a number of key initiatives during the pandemic. In addition
to providing financial support to local charities, Alfa donated
hand sanitiser, face masks and gloves to two hospitals and a
food bank and socks to a local mission.

Inclusion and diversity is very important to the Board and wider
employees and the education and awareness programmes in
this area are very much in demand. Mental wellbeing has been
a key focus area during the year, with many colleagues finding
the loss of physical office space isolating.

Building trusted partnerships through ongoing

The Board places great importance on having

dialogue helps us to better understand the

needs of our partners and to develop and

improve our offering.

positive relationships with all shareholders

and seeks to ensure there is an appropriate

and constructive dialogue with investors.

How the Board engaged

The Board receives reports on how we have worked with our

We conduct extensive engagement with our institutional

partners throughout the year, with a focus on key commercial

investors throughout the year. The Board was disappointed

events, which have been mainly virtual events due to strict

that, due to Covid-19 restrictions, the AGM was held as a closed

worldwide restrictions on large gatherings.

meeting in 2020. An invitation to all shareholders was included in

the Notice of Meeting to invite questions from the shareholders.

The Board considered how we can build and improve on our

existing commercial partnerships when discussing strategic

The Board receives regular updates on investor communication

opportunities during the Strategy day in August 2020.

activity, changes to the shareholder register, analysis of share

price performance and particular investment themes such as

environmental, social and corporate governance. In addition,

the feedback from shareholder/analyst interactions is shared

with the Board on a regular basis, via our corporate brokers.

Outcome of engagement

Executive Directors are involved directly with partner senior

The Board considers information from across the Company to

management and provide regular updates to the Board on

help it understand the impact of its decisions, and to consider

key partner developments and issues. The Board supports the

the interests and views of our key investors. Our Investors

continuing development of our partner training and learning

understand the strategy that underpins our future growth

programme, which aims to deliver a comprehensive training

plans and are keen to engage with regard to financial and

schedule including Alfa Systems training, our delivery methodology

operating performance of the business.

and simulation based implementation workshops.

We undertook a shareholder consultation on the implementation

of our new Remuneration Policy, which received constructive

feedback from shareholders.

Engagement in 2021
Listening, learning and responding to our people will continue
to be a priority during the next 12 months. We have, as part
of this, formalised our internal communications calendar
to ensure we have the opportunities to interact whilst the
Company works remotely.

Engagement in 2021
We believe Alfa has an important role to play in creating a
positive impact on the health of the environment in which
we live and operate. The Board will enhance Alfa’s approach
to ESG and recognise that we have an opportunity to more
actively manage the environmental impact of our business.

Engagement in 2021

We will continue our engagement with our commercial

We will continue to engage with our shareholders throughout

partners, ensuring we are adapting to their needs in this

2021. Due to the ongoing uncertainty around Covid-19

changing environment.

restrictions, the Board has taken the decision to hold the

2021 AGM via an online meeting platform to facilitate

Our partnership programme is an important part of

shareholder participation.

Alfa’s long-term growth strategy. We aim to develop our

partner ecosystem to increase Alfa’s operational capacity

and sales opportunities.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
55

Employees

Communities

Partners

Investors

Our talented and engaged employees are committed

As a long-term sustainable business, we want

to upholding our values, enabling us to deliver our

to maximise our social value, whilst reducing our

strategic priorities. We recognise that listening to

impact on the environment. Our culture is based on

our employees and keeping them engaged is essential

individual accountability. We encourage employees

to our success.

to support and engage with the local community.

How the Board engaged

Workforce engagement continues to be a key priority for the

The Board endorses the encouragement of our employees to

Board. Vicky Edwards, the Chief People Officer, attends Board

contribute to the community and the environment through the

meetings once a year to provide an update on all HR initiatives,

provision of their time and expertise. This includes supporting

while Matthew White the COO, updates the Board with an

local schools and charities through Company led activities and

HR dashboard, showing key statistics and Pulse survey results

Company matched monetary donations.

are reviewed at each Board meeting. Our employee opinion

survey formally captures their views and is a key part of how

We are dedicated to reducing our environmental impact and

we track engagement. In response to the challenges raised by

continually improving our environmental performance as an

the pandemic, we held a number of live events via Zoom led by

integral part of our business strategy and operating methods,

the Company Leadership Team and a town hall with the Board.

with regular review.

Feedback, suggestions and concerns from employees across

the business are also considered through channels such as

town hall meetings and CLT questions and answers sessions.

Outcome of engagement

Our employees are proud to work at Alfa and we are proud

The Board aims to contribute positively to the communities

of Alfa’s response to Covid-19, we did not furlough any staff

and environments in which Alfa operates. The Board supported

and provided funds to support home working. Following their

a number of key initiatives during the pandemic. In addition

appointments, both Adrian Chamberlain and Charlotte de

to providing financial support to local charities, Alfa donated

Metz published video messages to introduce themselves to

hand sanitiser, face masks and gloves to two hospitals and a

our employees and provide an overview of their experience.

food bank and socks to a local mission.

Inclusion and diversity is very important to the Board and wider

employees and the education and awareness programmes in

this area are very much in demand. Mental wellbeing has been

a key focus area during the year, with many colleagues finding

the loss of physical office space isolating.

Engagement in 2021

Listening, learning and responding to our people will continue

We believe Alfa has an important role to play in creating a

to be a priority during the next 12 months. We have, as part

positive impact on the health of the environment in which

of this, formalised our internal communications calendar

we live and operate. The Board will enhance Alfa’s approach

to ensure we have the opportunities to interact whilst the

to ESG and recognise that we have an opportunity to more

Company works remotely.

actively manage the environmental impact of our business.

Building trusted partnerships through ongoing
dialogue helps us to better understand the
needs of our partners and to develop and
improve our offering.

The Board places great importance on having
positive relationships with all shareholders
and seeks to ensure there is an appropriate
and constructive dialogue with investors.

How the Board engaged
The Board receives reports on how we have worked with our
partners throughout the year, with a focus on key commercial
events, which have been mainly virtual events due to strict
worldwide restrictions on large gatherings.

The Board considered how we can build and improve on our
existing commercial partnerships when discussing strategic
opportunities during the Strategy day in August 2020.

Outcome of engagement
Executive Directors are involved directly with partner senior
management and provide regular updates to the Board on
key partner developments and issues. The Board supports the
continuing development of our partner training and learning
programme, which aims to deliver a comprehensive training
schedule including Alfa Systems training, our delivery methodology
and simulation based implementation workshops.

Engagement in 2021
We will continue our engagement with our commercial
partners, ensuring we are adapting to their needs in this
changing environment.

Our partnership programme is an important part of
Alfa’s long-term growth strategy. We aim to develop our
partner ecosystem to increase Alfa’s operational capacity
and sales opportunities.

How the Board engaged
We conduct extensive engagement with our institutional
investors throughout the year. The Board was disappointed
that, due to Covid-19 restrictions, the AGM was held as a closed
meeting in 2020. An invitation to all shareholders was included in
the Notice of Meeting to invite questions from the shareholders.

The Board receives regular updates on investor communication
activity, changes to the shareholder register, analysis of share
price performance and particular investment themes such as
environmental, social and corporate governance. In addition,
the feedback from shareholder/analyst interactions is shared
with the Board on a regular basis, via our corporate brokers.

Outcome of engagement
The Board considers information from across the Company to
help it understand the impact of its decisions, and to consider
the interests and views of our key investors. Our Investors
understand the strategy that underpins our future growth
plans and are keen to engage with regard to financial and
operating performance of the business.

We undertook a shareholder consultation on the implementation
of our new Remuneration Policy, which received constructive
feedback from shareholders.

Engagement in 2021
We will continue to engage with our shareholders throughout
2021. Due to the ongoing uncertainty around Covid-19
restrictions, the Board has taken the decision to hold the
2021 AGM via an online meeting platform to facilitate
shareholder participation.

Strategic reportGovernanceFinancial statementsOther information
56

E N V I R O N M E N TA L , S O C I A L A N D G O V E R N A N C E

“ It is crucial to the vitality of our

business that we contribute to the
wider society. We are in a position to
provide assistance and expertise to
the communities in which we operate,
and therefore have an obligation to do
so, be that through the provision of
interview training in local schools, or
fundraising for our charity partners.”

United Nations Sustainable Development Goals
The United Nations Sustainable Development Goals are the
blueprint to achieve a better and more sustainable future for
all. They address the global challenges we face, including those
related to inequality, climate change, environmental degradation
and poverty.

Alfa has initially selected four sustainable development goals
to help shape and inform our CSR efforts. We feel these goals
fit well with many of the initiatives we currently have in progress,
and some of the things we want to focus on in the future.

4. Quality Education

5. Gender Equality

13. Climate Action

17. Partnerships
for the Goals

Andrew Denton
Chief Executive Officer

This section highlights what we are doing
to make a positive impact through our
sustainability and stakeholder engagement.
At Alfa, we have a passion for using
our expertise to create shared value
for the communities in which we work.
We believe that our corporate activity
should positively impact the lives and
livelihoods of everyone we work with,
as well as the wider community.

Our dedicated Corporate Social Responsibility
(CSR) team has been in place for over 15 years, with
team members drawn from across the Company.
We have recently expanded our CSR activities
around the globe, with a new local CSR team being
created in the Asia Pacific region and a number
of inclusion-related breakfast sessions, and social
and wellbeing events being coordinated globally.
These teams and events not only showcase our
commitment to communities in which we operate,
but provide an invaluable platform for people to
both share their experiences and learn from others.

1. Our people

2. Our customers and suppliers

3. Our community

4. Our environment

The deeply collaborative nature of our culture
means that we see active employee engagement
in a wide variety of activities, from our employee
volunteering scheme, fundraising for charity
partners, donation of equipment such as old
laptops to local schools, a commitment to reducing
our environmental impact and much more.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202057

Our people
We strive to be a great employer.
Our people are key and we want
to thank each and every one
of them for helping us provide
a first-class service to our
customers. We are committed
to helping our people grow both
professionally and personally,
within an inclusive workplace.

Alongside supporting and promoting equality
and diversity in the workplace, we are committed
to helping our people grow both professionally
and personally.

Health and wellbeing
Never before has wellbeing been more
important. During the pandemic, rather
than accessing the furlough scheme we
have redirected internal time to develop
a rich programme of wellbeing resources,
activities and events to support our
employees through a difficult period.
We enhanced our paid carer leave
allowance for parents having to care for and
educate their children. We implemented
an employee benefits platform giving
access to physical, mental and financial
advice and assistance, and we made available
a working from home allowance to ensure
that working from home was both safe and
a comfortable experience for our people.

Recruitment and retention
Alfa strives to be an appealing prospect to
all candidates irrespective of gender, race,
ethnicity, religion, age, sexual orientation
or disability and we are proud to have been
in a position to welcome 70 new joiners
across a variety of teams in our offices
in 2020. We introduced new recruitment
channels in 2020, such as Tech Returners,
to give us access to candidates from a
wider range of backgrounds and we look
forward to carrying that theme into 2021.

We have a structured career development
programme which provides all employees
with visibility of career progression and
promotion opportunities. Our annual
salary review and promotion process
gives all employees the opportunity to
be recognised for their performance
and progression.

Inclusion
and diversity
Our dedication to diversity
and inclusion runs from the
Board through the whole

Company. Staff work hard to facilitate a
safe and enjoyable working environment
for all colleagues, enhancing morale
and productivity.

Our approach to inclusion and diversity
is a critical part of our business and
culture. Our team, which speaks over
30 languages and comprises more than
50 nationalities, is more productive for
our diversity of thought and experience.
Our inclusion community meets regularly
to contribute to sustainable growth and
unleash possibilities by embracing our
mix of different perspectives.

James da Silva

Gender equality
In 2019, the Alfa Women’s
Community was formed.
This body represents
female staff and strives
to achieve a progressive and inclusive
working environment where all can
thrive. The community also aims to
provide support to people of any gender
to address concerns of bias related to
women, and actively encourages gender
diversity – not only within Alfa, but across
the industry in which we operate.

Within Alfa globally, 30% of our people
are female (2019: 29%). Alongside our
work to improve gender balance, we have
continued our long-standing relationship
with Women in Tech, an organisation
which provides guidance and support
to women either seeking to enter, or
operating in, the technology sector.
In 2020 we began a partnership with
The Women’s Association where we have
taken part in a number of initiatives such
as the ‘For the Women’ campaign, which
aims to raise the visibility of women in
organisations. This is vital to empowering
women and achieving gender parity.

Women’s Community
and initiatives
Our internal Women’s
Community is in place
to support our existing

population of women. It exists to
foster a progressive environment
with equal representation of women
by providing a support network of
allies to encourage gender diversity
in Alfa and across the industry.

“ In my time with Alfa,
I’ve experienced the
transformation to the
diversity of people. My
co-workers are an eclectic mix
of many backgrounds, races,
orientations, genders, and
most importantly different
viewpoints. This makes us
stronger as an organisation.”

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E N V I R O N M E N TA L , S O C I A L A N D G O V E R N A N C E C O N T I N U E D

Vicky Edwards
Chief People Officer

New hires in 2020
that were female

37.5%

“ We are proud of the work that we do
at Alfa to create and support diverse
and balanced teams throughout the
organisation. I am inspired by the
passion and drive of our employees
in maintaining an inclusive working
environment. I am confident that our
continued focus and long-term plans
will enable us to create a more diverse
organisation that we are all proud of.”

Flexible working
We have seamlessly switched to remote
and flexible working, providing support
depending on personal circumstances.
With mental and physical wellbeing
considerations, as well as home-schooling
commitments, we have encouraged a more
flexible approach to the working day to
ensure that everyone feels able to cope.
Employees have fed back that they value
many of these changes to their working
patterns and we fully intend to continue
on this path post pandemic. We continue
to maintain a 100% record of employees
returning to work after maternity and
paternity leave.

Mentoring and Coaching
To continue the development of a female
talent pipeline, we encourage and promote
uptake of our career management scheme
to all employees across the Company.
In 2019, we offered our female senior
leaders access to an external coaching
programme and this continued into 2020.
Looking outside of the Company and to the
younger generation, our CEO has recently
taken part in ‘The Executive Challenge’,
a programme rolled out by the Women’s
Association that gives girls between
the ages of 12 and 16 the opportunity
to learn about life as an executive.

Caleb Bird

“ The Alfa team’s support
throughout my first year
as a new graduate has been
amazing and has set a high
standard. I hope to be able to
provide the same support for
new joiners in the future.”

Culture
We are very proud of our culture.
It is one of our greatest strengths and
remains highly valued by our people.
We have worked hard this year to ensure
our culture is retained in our remote
working environments and we are pleased
to see this reflected in our positive ratings
in our quarterly Pulse surveys. Our culture
is a key factor in our consistently high
rates of staff retention.

Pivotal to this culture, is our commitment
to promoting collaboration and innovation
across all levels and roles within the Company.

We continued to run our bi-monthly
innovation days and annual hackathon
remotely in 2020. The categories for the
hackathon and idea suggestions came not
only from our engineers but from a range
of people and departments including
the sales team and product architects.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202059

“ Innovation continues to be
at the heart of Alfa culture.
Our innovation events
are opportunities for the
Company to connect, take
a step back and think how
we see our industry, our
ways of working, and our
World change; and what that
means for us, for our clients,
and for our future.”

Zoe Chambers

Statutory gender pay gap (GPG) reporting

The gender pay gap is the measure
of the difference in average pay
between all men and women across
an organisation, regardless of their role,
level, length of service or location and any
other differentiating factors. The gender
pay gap is reported as a mean average
and median average (midpoint) figure.
The gender pay gap is different to the
concept of equal pay which requires that
women and men are paid the same for
doing the same job and it is unlawful to
pay people unequally on the basis of
whether they are a man or a woman.

We had less than 250 employees in
our largest trading subsidiary, Alfa
Financial Software Limited, but we
are publishing voluntarily to continue
our commitment to diversity across
our Alfa team. The analysis is based
on data as at 5 April of each year and
this report reflects the data collected
and analysed as of 5 April 2020.

Gender pay gap

Statutory

Alfa

Pay quartile

1st (lowest)

2nd

3rd

4th (highest)

All

2020
Median
pay gap

14.7%

15.5%

2019
Median
pay gap

23.5%

17.3%

2020
Mean
pay gap

15.3%

15.5%

2019
Mean
pay gap

21.1%

16.2%

% in pay quartiles

2020 men 2020 women

2019 men 2019 women

63%

73%

78%

81%

74%

37%

27%

22%

19%

26%

69%

71%

84%

77%

31%

29%

16%

23%

As well as fun hacks such as ‘Humans of
Alfa’, a way to get to know your colleagues
better while we are remote, we had some
truly inspirational hacks that will add
true value to our day-to-day operations
and product.

Our Events team has done a fantastic
job of creating a programme of virtual
events throughout the year to keep
everyone connected and engaged.
These range from our Global Company
conference; social talks across a variety
of topics including our most popular talk
to date, with an astronaut, Marsha Ivins;
as well as exercise classes, mediation
and nutrition sessions, team socials
and wellbeing kits posted to home.

Learning and development
We recognise that developing the
best people is the key to providing
our clients with service of the highest
quality, so here at Alfa we are passionate
about maintaining a culture of continuous
learning and development. We focus
on the uniqueness of each individual
and adopt an approach that supports
career aspirations, and the skills and
knowledge needed to ensure they reach
their full potential. We have a rich library
of development options, from classroom-
based courses in our standard curriculum,
to bite-sized courses, webinars and resources
that can be accessed at the point of need.

Most Alfa employees create a Performance
and Development Process (PDP) plan in
consultation with their manager which
becomes the focus of their personal and
professional development. Alfa provides
its staff with a budget of up to five days’
training per year which we encourage all
staff to use.

Our Learning and Development objectives
for 2021 include the following:

• Enhance the range of development
options – with a specific focus on
People Skills.

• Grow the range of ‘at point of need’

development options.

• Support and develop our existing leaders.
• Identify and develop our next generation

of leaders.

We have also introduced a range of
tailored coaching programmes and
support across the business. This includes
those transitioning into leadership roles,
particularly during their critical first six
months, and for our most senior female
leaders, focusing specifically on their
personal development and progression
within Alfa. We are continually working
to improve our ability to formally coach
people across the organisation.

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Our customers and suppliers
Our EMEA and US user groups
provides our customers an
opportunity to reflect together
on their experience and
collectively challenge us in
all aspects, from our product
to our delivery approach.

We held two remote meetings of the EMEA user
group in 2020, covering topics which included
the Alfa strategy and product roadmap.

User groups
While a little more challenging as a result
of the pandemic, our EMEA user group
has continued to grow throughout 2020.
Several new Alfa customers joined the
group to bolster our numbers and ensure
continued representation across our
diverse customer base. We held two
remote meetings of the user group in
May and October, covering discussion of
the Alfa strategy and product roadmap
amongst other topics. The session in
October incorporated the annual
feedback and reflection session which
provides our customers an opportunity
to reflect together on their experience
and collectively challenge us in all aspects,
from our product to our delivery approach.

Themes derived from the feedback
and reflection session will drive the
ongoing user group agenda, ensuring
that discussion topics and initiatives
provide value to all involved. Two working
groups met through 2020, focusing on
the collaborative delivery of risk-free
rates functionality into Alfa Systems
alongside discussion of configuration
management best practice. There is
plenty on the agenda for 2021 already
as the group looks to capitalise on more
excellent progression in 2020.

The US user group (known as the partner
forum in the US) met remotely in June
2020. In addition to discussing Alfa’s vision
and strategic processes, it covered Alfa’s
response to Covid-19 and how the Alfa
Support team operates (as we introduced
24/7 client support for the first time in
January 2020).

Partnering in CSR
In 2020 we partnered more
with clients on CSR activities,
an example being Hitachi
Capital, which delivered a

number of social talks, giving us ideas for
initiatives we could use to increase levels
of mentoring and support throughout
the Company. Partnering with clients
is something we want to do much more
of in 2021 and beyond.

There is regular engagement with the
wider Company through dedicated
events, blog posts and internal forums.
This level of interaction has fostered
the development of a valuable platform
for open communication at Alfa.
Community representatives are active
at each of our main locations worldwide,
delivering coordinated events and
facilitating discussion.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
61

the entire IT community. Alfa’s approach
to this issue is to donate laptops and
other IT equipment that is still functional
to schools and charities. This not only
reduces our impact on the environment
but also allows schools and charities
access to IT hardware that they may
otherwise be unable to acquire. This
has become increasingly relevant with
the onset of the pandemic where many
pupils do not have access to laptops
to support their remote learning.

Volunteering
Our long-established volunteering
scheme enables us to strengthen our
links with the local community while
providing our staff with an opportunity
to use their skills outside of the workplace.
Alfa has built mutually beneficial, long-
term partnerships with a number of
community organisations. Ultimately,
we want these relationships to be
good for the individual, good for Alfa
and good for the community. Alfa selects
community programmes that can bring
real benefits, matching our core business
of providing IT expertise and consultancy.
Volunteering opportunities allow our staff
to take on new responsibilities that would
not normally be available to them as part
of their day-to-day role. These placements
allow our staff to be exposed to new
experiences and develop new skills while
also giving the community access to
technical, consultancy and design services
that would not usually be available.

Our volunteering scheme is a big selling
point for new joiners to the Company.
We offer three days’ paid volunteering per
year and have a framework in place to help
employees choose a suitable volunteering
opportunity. All employees are encouraged
to take an active part in the schemes
offered and volunteers range in seniority
from junior consultant all the way to CEO.

2020 presented obvious challenges
to in-person volunteering. However,
we successfully set up a new scheme
with Code Your Future here in the UK.
Code Your Future is a technology charity
which helps people from disadvantaged
backgrounds (for example refugees,
asylum seekers and local people on
hard times) learn to become full stack
developers. A number of Alfa colleagues
have volunteered with Code Your Future
remotely and have had a great time doing
so. It’s great to be able to use our specific
technical expertise to give back to the
communities in which we work.

Our community
Our corporate social
responsibility strategy
is focused on adding value
to the communities in
which we live and work.

As a long-term sustainable business, we want
to do more to maximise the social value that
we create. Our culture is based on individual
accountability. We encourage our people to support
and engage with local activities and charities.

Our corporate social responsibility
remains central to who we are as an
organisation, and is a fundamental
part of our culture.

Employee community groups
We have dedicated employee-led
communities that focus on various facets
of diversity, to ensure employees are
treated fairly and respectfully, have equal
access to opportunities and resources,
and can contribute fully to Alfa’s success.
Alfa empowers the communities (which
include Inclusion, LGBTQ+, Racial Equity,
Women’s and Parents) to share their
experiences and ideas, and to effect
change through policy, partnerships
and education.

Charitable donations

over £30k

Fundraising
Alfa donates to both
local and national charities,
while many staff members
undertake sponsored
activities in their own time, to which
their colleagues contribute generously.
Specific charitable events, such as
the World’s Biggest Coffee Morning
supporting Macmillan Cancer Support,
provide a focus for raising funds.
In addition, Alfa events provide an
opportunity for staff to contribute
money to charities.

In 2020 and 2021 we are partnering
with Mind in the UK and Feeding America
in the US. To date we have raised over
£15,000 for Mind and over US$5,000
for Feeding America.

The fast pace of technology sometimes
means that the hardware that was top
of the range a few years ago is now no
longer able to run today’s power-hungry
applications. The safe and environmentally
sustainable disposal of IT equipment
presents a considerable challenge to

Tobi Strillozzi

“ It’s great to be part of a
company that values its
employees and is taking
strides towards becoming
a progressive organisation.
It is especially refreshing
to witness the gradual
increase in the eclectic mix
of talent in recent years.”

Strategic reportGovernanceFinancial statementsOther information62

E N V I R O N M E N TA L , S O C I A L A N D G O V E R N A N C E C O N T I N U E D

Our environment
Alfa remains committed to better
understanding our contribution
to climate change and working
collaboratively with stakeholders
to reduce potential impacts. We
have an environmental policy
which recognises our responsibility
to the environment beyond legal
and regulatory requirements.

As a company with over 300 staff,
Alfa realises that its actions can have
a significant impact on the environment.
In acknowledging the increasing
responsibility that we, as a business,
have to our environment, we have really
focused our efforts on reducing this impact.

Green Team Initiatives
Spearheaded by the Green Team, Alfa is
continuously aiming to review and improve
our business practices in order to reduce
our carbon footprint. Just as we use video
conferencing to reduce travel to client
sites, there are many simple measures in
place to reduce our energy consumption.

Recycling and reducing waste are areas that
we review constantly. In order to decrease
the amount of paper we consume, we are
no longer printing out training materials
and instead use online training resources.

Recycling schemes are in place at all of
Alfa’s offices and Alfa has seen a consistent
quarter-on-quarter improvement in the
recycling of paper, cardboard, cans, plastic
and glass. We also recycle technical hardware
that cannot be donated to charity.

We encourage ideas from staff on how
to reduce our environmental impact and
these have led to the implementation
of Company-wide policies; for example,
we have implemented the UK’s Cycle to
Work scheme to encourage and support
carbon-free commuting amongst our
staff. The uptake has been good but we
anticipate further enthusiasm when we
return to commuting. Prior to Covid-19,
we had also introduced the recycling of our
coffee ground waste through BioBean and
had stopped ordering single-use plastic
milk bottles which have been replaced with
reusable glass bottles which are collected
and refilled. With our milk consumption in
the UK office (pre-Covid-19) reaching 40
litres a day, this culminates to a significant
daily reduction in plastic consumption.

Prior to the closure of the UK office
in 2020, Alfa’s Green Team was in the
process of carrying out a sustainability
audit of all food/drink products ordered
to our café, ‘Moor’. This would ultimately
involve switching to more sustainably made
suppliers and produce, in line with Alfa’s
values. This initiative will continue in 2021.

As a company with expertise in IT, we
acknowledge that the equipment we
operate can be accountable for high
levels of energy usage. We have made
use of the latest server virtualisation
technology to ensure that our IT
infrastructure energy consumption
is kept to an absolute minimum.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202063

our emissions (where possible) has
been developed, we will invest in carbon
offsetting initiatives to begin the process
of bringing our emissions to net zero.
We will do the necessary due diligence
to ensure we are employing the most
appropriate methodology to achieve this
for a company of our size and distribution.

Once a strategy to reduce our emissions
(where possible) has been developed, we
will invest in carbon offsetting initiatives to
begin the process of bringing our emissions
to ‘net zero’. We will do the necessary due
diligence to ensure we are employing the
most appropriate methodology to achieve
this for a company of our size and distribution.

We are dedicated to reducing our
environmental impact and have pledged to
reach carbon neutrality by the end of 2021.

Our staff are encouraged to be responsible
for their own energy usage by switching
off their computers overnight and using
laptop standby mode whenever possible.
Turning off lights is a simple step we take
to reduce our energy consumption and
all Alfa offices have lights on sensors so
unnecessary energy is not used when the
office is empty. In taking responsibility
for their own energy usage, Alfa staff share
knowledge so others can benefit from their
experience, one example being the use
of Bye Bye Standby products to minimise
energy usage at home.

We encourage staff to take on Meat-Free
Mondays/Veganuary and have previously
showcased the benefits of plant-based
cooking by hosting a vegan/vegetarian
food market in the office (prior to
Covid-19). This raised money for WWF
whilst also boosting enthusiasm for
meat-free diets.

The Alfa Events team is committed
to ensuring conference venues are
environmentally conscious; for example,
no single-use plastic/paper is used
for catering, and any Alfa branded
clothing is sustainably-made.

Looking ahead into 2021
In 2021 we hope to be back in the office
and resurrect our Green Team events and
volunteering days which were planned for
2020. This includes a tree-planting drive,
regular park clean-ups, another canal
clean-up with the Canal River Trust and
the introduction of a more regular vegan
food market to promote meat-free diets.

We are dedicated to reducing our
environmental impact and continually
improving our environmental performance
as an integral part of our business strategy
and operating methods, with regular review.
Therefore, we have pledged to carry out a
comprehensive review of the total carbon
emissions of Alfa’s operations, including
flights, equipment and electrical output,
aiming to identify and implement strategies
for reduction. Once a strategy to reduce

Carbon emissions
Alfa remains committed
to better understanding
our contribution to
climate change and

working collaboratively with stakeholders
to reduce potential impacts. We have an
environmental policy which recognises
our responsibility to the environment
beyond legal and regulatory requirements.
We are hoping to continually improve our
environmental performance as an integral
part of our business strategy and operating
methods, with regular review.

We will be carrying out a comprehensive
review of the total carbon emissions of Alfa’s
operations, including flights, equipment
and electrical output, aiming to identify
and implement strategies for reduction.

2020

2019

2018

–

Scope 1 – Direct emissions from
the combustion of fuels (tCO2e)

Scope 2 – Emissions resulting from
the purchase of electricity, heat,
steam or cooling (tCO2e)

150

Total Scope 1 and 2 consumption (kWh)

558,346

Scope 3 – Business travel where
responsible for fuel (tCO2e)

Total (tCO2e)

Revenue (£ million)

Intensity ratio – tCO2e per £m of revenue

198

78.9

2.5

143

–

678

821

64.5

12.7

153

–

737

890

71.0

12.5

We will be launching internal information
campaigns, including blog posts, to
incentivise our employees to take both
individual and group actions to reduce
emissions. This may involve using
alternative forms of transport to flying,
and electing to utilise remote meeting
software rather than travelling to meet
face-to-face where possible. Our
number one priority remains to deliver
Alfa implementations on time and to
the necessary standard, so individual
discretion will be required.

The Environmental information provided
in this section complies with the UK’s
new environmental Streamlined Energy
and Carbon Reporting (SECR)
regulation requirements.

Our footprint is calculated using the
EMA methodology for SECR Reporting
on calculating organisational footprints.
Activity data has been converted into
carbon emissions using published emissions
factors. Alfa recognises that reporting
against the Taskforce on Climate-related
Financial Disclosures will become mandatory
in the coming years, we will start to align
our reporting with this disclosure.

The Strategic Report and the Financial
Review are approved by the Board of
Directors and signed on its behalf by:

Andrew Denton
Chief Executive Officer
22 March 2021

Strategic reportGovernanceFinancial statementsOther information64

C H A I R M A N ’ S I N T R O D U C T I O N T O G O V E R N A N C E

“ The governance environment that

Alfa had in place as the Covid-19 crisis
unfolded, supported high-quality decision-
making which ensured we maintained the
strong business momentum we had prior
to the pandemic.”

Andrew Page
Chairman of the Board and Founder

Board focus
areas in 2020
• Two new Non-Executive
Directors and Chief
Financial Officer.
• Special dividend
of 15 pence per
ordinary share.
• Performance of the
business, financially
and operationally.
• 2021 budget and

long-term strategic plan.

• Sales pipeline and

business development.

Dear shareholders,
On behalf of the Board, I am pleased
to present the Group’s corporate
governance report for the financial year
ended 31 December 2020. This report
outlines how the Board has ensured
that robust and appropriate governance
procedures are in place to ensure
effective and prudent management of
the Company that will deliver long-term
sustainable success for the benefit of our
shareholders and broader stakeholders.

In this report, we set out our approach
to corporate governance and provide
detail on the role of the Board of
Directors, followed by more detailed
sections on the work of each of the
three key Board Committees: the Audit
and Risk Committee, the Nomination
Committee and the Remuneration
Committee. Together, these give a clear
insight into how we manage corporate
governance principles and processes
within the Group.

Momentum in times of uncertainty
The emergence of the global Covid-19
pandemic provided an unprecedented
challenge to all companies, as boards and
senior management sought to understand
the implications of the pandemic for
their companies and the necessary steps
required to protect their businesses
and their stakeholders. The governance
environment that Alfa had in place as
the Covid-19 crisis unfolded, supported
high-quality decision-making which
ensured that we maintained the strong
business momentum we had prior to
the pandemic, whilst at the same time,
looking after the interests of all our
stakeholders, particularly our employees.
Further detail of how the Company
responded to these unprecedented
times is set out throughout this report
and is summarised on page 15.

Despite the initial challenges of 2020,
the Company exceeded expectations
and through a number of trading updates
issued in the second half of the year we
highlighted the increasing expectations
for full year revenue and profit. As a result
of Alfa’s strong performance, we were
delighted to announce a special dividend
in the amount of 15 pence per share,
which was paid to shareholders in
November 2020.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202065

Board changes during the year
We were delighted to appoint Adrian
Chamberlain and Charlotte de Metz to
the Board as Independent Non-Executive
Directors on 24 April 2020. I am pleased
to report that both Adrian and Charlotte
have brought extensive experience and
expertise and have made a massive
contribution to the Board. The Board
is doing an outstanding job of advising,
supporting and providing constructive
challenge to management. Duncan
Magrath joined Alfa in March 2020 as
Chief Financial Officer and was appointed
to the Board in April 2020. Duncan
has continued to transform the finance
function and has been a great addition
to the Company’s executive team.
I express my thanks to John Miller who
stood down as interim Chief Financial
Officer following Duncan’s appointment.

Finally, I would like to take this
opportunity to thank all of our
stakeholders for their continuing
support in these unprecedented times.

Andrew Page
Chairman of the Board and Founder

Our approach to
corporate governance
Corporate governance at Alfa takes
a thoughtful and considered approach
involving the Board as well as other key
personnel to identify and apply the
principles of good corporate governance.

This means balancing the interests of
the Company’s many stakeholders, such
as shareholders, employees, customers,
suppliers and the communities we work
in. Strong governance helps to cultivate
a company culture of integrity and
stakeholder alignment, alongside corporate
structures that improve leadership,
accountability and effectiveness.
This brings a sharper focus to strategic
objectives and translates into better
decision-making which, in turn, drives
competitive advantage and growth and
results in stronger corporate performance
and a sustainable business model. The
Board has maintained a strong focus
during the year on the Company’s strategic
goals whilst ensuring that the Company
has the right people in place to deliver
on its strategy. During this period of
continued growth, it is vital to ensure that
the Company’s governance processes are
robust in order to ensure that the business
is protected and that all stakeholders’
interests are taken into account.

Culture, values and people
Alfa has fostered a strong Company culture
which is underpinned by a set of values
which ensure that everyone stays focused
on delivering our strategy whilst staying
true to who we are. The Board recognises
the importance of setting this culture and
ensuring that the necessary resources are
in place to allow our people to deliver the
Company’s strategy.

The Board is kept up to date on employee
engagement through the inclusion and
discussion of the Pulse survey results
which are collected on a bi-monthly
basis and presented to the Board by
the Chief Executive Officer. A focus
of the Company Leadership Team
this year has been ensuring the overall
welfare of our employees throughout
the Covid-19 pandemic.

The Board is satisfied that the approach
toward engagement with the workforce
described on pages 70 to 71 is robust.

Strategic reportGovernanceFinancial statementsOther information66

B O A R D O F D I R E C T O R S

Andrew Page
Executive Chairman

Andrew Denton
Chief Executive Officer

Duncan Magrath
Chief Financial Officer

Matthew White
Chief Operating Officer

Appointment
to the Board
May 2017

Committees

Appointment
to the Board
April 2017

Committees
n/a

Appointment
to the Board
April 2020

Committees
n/a

Appointment
to the Board
October 2019

Committees
n/a

Other appointments
n/a

Key strengths
Andrew has considerable
senior management
experience and a deep
understanding of the
asset finance industry.

Career and experience
Andrew is one of the
founding Directors of Alfa.
Andrew became the Chief
Executive Officer in 2010
and the Executive Chairman
in September 2016. Andrew
provides commercial oversight
and with the Board sets the
strategic direction and goals
of the Company.

Key strengths
Computer scientist by
training, considerable senior
management experience
and significant experience
in the asset finance industry.

Career and experience
Andrew joined Alfa in 1995
and became a member
of the Board of Directors in
2003 as Sales and Marketing
Director. He was made
Chief Operating Officer
in 2014 and became
CEO in September 2016.
Andrew is also Director
and joint founder of the
Leasing Foundation, an
organisation that supports
the leasing and asset finance
industry through charitable
activities, research and
development.

Key strengths
Extensive experience in
senior financial positions
both in the UK and
internationally, including
a deep understanding
of investor relations
and financial strategy.

Career and experience
Duncan started his career
at Price Waterhouse, and
qualified as a Chartered
Accountant in 1989.
He joined Ocean Group in
1992, and spent 13 years
in the UK and US in various
finance roles as the group
transformed into Exel
Logistics. He joined Balfour
Beatty, the infrastructure
company, in 2006 and was
Group CFO from 2008 to
2015. In 2016 he joined
Rubix, an Industrial Parts
Distributor, as Group
CFO and was in that
role through to 2019.

Key strengths
Considerable senior
management experience
in software development
and all aspects of systems
implementation and delivery.

Career and experience
Matthew joined Alfa as a
graduate in 1999, starting
in a software development
role. In his 20-year career
delivering software for
the asset finance industry,
Matthew has direct
experience of everything
involved in systems
implementation, from
configuration and
testing support to
project management
for a number of UK
and European projects.
From 2010 to 2016,
Matthew’s role grew to
include responsibility for
most of the operations
of the Company, before
he led Alfa’s IPO in 2017.
As Chief Operating Officer,
a role which he assumed in
February 2019, Matthew
is accountable for the
international operations
of the business, including
Alfa’s technology platform
and project delivery.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Committee membership

Audit and Risk

Nomination

Remuneration

Committee chair

Steve Breach
Independent
Non-Executive Director

Adrian Chamberlain
Independent
Non-Executive Director

Charlotte de Metz
Independent
Non-Executive Director

Chris Sullivan
Senior Independent
Non-Executive Director

Appointment
to the Board
August 2019

Committees

Appointment
to the Board
April 2020

Committees

Appointment
to the Board
April 2020

Committees

Appointment
to the Board
July 2019

Committees

Other appointments
Advisor to a number
of private companies

Key strengths
Steve has held a number
of CFO roles and has
extensive experience
in corporate finance.

Career and experience
Steve is a member of the
Institute of Chartered
Accountants in England and
Wales, having qualified with
EY in 1993 where he focused
on providing corporate
finance advice to technology
businesses in the UK and
internationally. Steve has
16 years’ experience as Chief
Financial Officer of a number
of businesses. Between 2010
and 2016, Steve was CFO of
Tribal Group PLC, a leading
international provider
of student management
software to the education
market. Steve has
subsequently pursued
a portfolio career, acting
as adviser to a number of
privately owned companies.

Other appointments
Chairman of eConsult Ltd
Non-Executive Director
of Cambridge University
Hospital NHS and Chair of
the Performance Committee

Key strengths
Extensive experience
internationally in both the
private and public sectors,
particularly in strategy
formulation and execution,
technology and Software
as a Service.

Career and experience
Adrian is a Non-Executive
Director of Cambridge
University Health Trust, one
of the country’s largest NHS
Trusts, where he chairs the
Performance Committee.
He is also Executive Chairman
of eConsult Ltd, a leading cloud
based medical triage company.
He previously has held senior
executive positions in a number
of private and public hi tech
and telecommunications
companies including
Chief Executive Officer of
Messagelabs and Achilles Ltd,
a member of the Board of
Cable & Wireless and Bovis
Lend Lease and a member
of the Operations Board at
Symantec. He holds an MA in
History from Trinity College,
Cambridge and an MBA from
the London Business School.

Other appointments
CPO, Synamedia Limited

Key strengths
Strong track record in
delivering innovative
employee development,
engagement, and retention
practices. She has extensive
experience in managing
high-impact, enterprise-wide
transformations in
challenging, fast-paced
environments.

Career and experience
Before joining Synamedia
in early 2019 as Chief People
Officer, Charlotte served
as Global Head of Human
Resources and more recently
as Executive Vice President
at Finastra, a global fintech
where she was responsible for
Executive Talent, corporate
social responsibility, culture
and values, and diversity
and inclusion. Prior to joining
Finastra in 2012 as Global
Head of Human Resources,
Charlotte spent over 11 years
at Ventyx, a global provider
of software solutions for
the energy, utility and other
asset-intensive businesses.
During her tenure at Ventyx
she held various HR roles,
latterly as Human Resource
Manager for Rest of World.

Other appointments
Chairman of the
Westminster Abbey
Investment Committee
Non-Executive Director
of Guild Esports PLC
Non-Executive Director
Goodwood Estates
Senior Independent Director
for DWF Group PLC

Key strengths
Extensive experience of
corporate, investment and
retail banking and asset
financing together with
general management and
listed company experience.

Career and experience
Chris was Chief Executive of
the Corporate & Investment
Bank at Santander UK, and
prior to this held various CEO
roles during a 40-year career
at The Royal Bank of Scotland
and NatWest. His 11 years
on the Group Executive
Committee included leading
Corporate Banking, Retail
Banking, Direct Line and
Retail Direct and culminated
in appointment to the post
of Deputy Group Chief
Executive in March 2014.
A recipient of the Leasing
Life European Lifetime
Achievement Award,
Chris brings expertise in
the asset finance industry,
having spent nearly 30 years
with the Lombard Group
in a number of directorate
roles including as CEO.

Strategic reportGovernanceFinancial statementsOther information

C O M P A N Y L E A D E R S H I P T E A M

Andrew Denton
Chief Executive Officer

Duncan Magrath
Chief Financial Officer

Matthew White
Chief Operating Officer

Richard Raistrick
Chief International Officer

Vicky Edwards
Chief People Officer

Date joined Alfa
May 1995

Date joined Alfa
March 2020

Relevant experience/previous roles
Richard is responsible for project delivery
of some of Alfa’s largest customers. He
has carried out consultancy and project
management engagements around the
globe, and has worked in the asset finance
sector since 1995.

Relevant experience/previous roles
Vicky joined Alfa in March 2020, bringing
26 years of experience in consultancy
businesses. A commercially focused HR
leader, Vicky has held leadership roles
across HR, commercial and operations
functions, as well as C-suite level
positions in the professional services,
technology and energy sectors.

Andrew Flegg
Chief Technology Officer

James Paul
Chief Delivery Officer

Richard Dewire
Chief Revenue Officer

Date joined Alfa
February 2005

Date joined Alfa
September 1999

Date joined Alfa
January 2001

Relevant experience/previous roles
Andrew brings over 35 years of
programming experience, with over
25 years in commercial software
development and 16 in the asset finance
industry. He was previously Alfa’s Global
Director of Platforms, covering internal
IT systems, cloud, information security
and solution architecture.

Relevant experience/previous roles
James is accountable for all EMEA
implementations and takes global
responsibility for support, resourcing
and partnering. James has over 20 years’
experience implementing in asset
finance for organisations of all sizes.

Relevant experience/previous roles
Richard has 19 years in the asset
finance industry and an in-depth
knowledge of Alfa Systems through
many years of implementation, with
extensive knowledge of Alfa’s sales and
commercial process. He was previously
Director of Strategy and Investment.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020T H E U K C O R P O R AT E G OV E R N A N C E C O D E 2 0 1 8 : O U R C O M P L I A N C E

Effective corporate governance provides
an essential foundation for the long-term
sustainable success of the Company. This
report sets out the key elements of Alfa’s
corporate governance arrangements,
including how we have sought to apply the
principles and provisions of the 2018 UK
Corporate Governance Code (the ‘2018
Code’) during the year.

A copy of the 2018 Code, issued by
the Financial Reporting Council can be
found at www.frc.org.uk. This governance
statement, including the Nomination
Committee, Audit and Risk Committee,
and Remuneration Committee Reports,
explains how we have applied the principles
and complied with the provisions of the
2018 Code.

Non-compliance
with Code provisions
The Group has complied with the Code
provisions during the financial year with
the exception of the following:

Code provision 9: The Chairman of
the Board was not independent on
appointment as he previously held
the position of Chief Executive Officer
and is the controlling shareholder of
the Company. On listing, the Board
unanimously supported, and continues
to support, the appointment of the
Chairman to retain his skills and experience,
and ensure continuity of service for Alfa’s
customers and commercial partners.

Code provision 24: For the period
from 1 January 2020 to 23 April 2020,
the membership of the Audit and Risk
Committee had two independent
directors pending the appointment
of Adrian Chamberlain and Charlotte
de Metz as additional members of
the Committee on 24 April 2020.

Code provision 32: For the period
from 1 January 2020 to 23 April 2020,
the membership of the Remuneration
Committee had two independent
directors pending the appointment
of Adrian Chamberlain and Charlotte
de Metz as additional members of
the Committee on 24 April 2020.

Section 3:
Composition,
succession and
evaluation

J Appointments
to the Board

K Board composition

L Board evaluation

See
page

Read more in the Nomination Committee
Report on pages 79 to 81

Section 1:
Board leadership
and Company
purpose

A Effective Board

B Purpose, strategy,
values and culture

C Governance framework

D Stakeholder engagement

E Workforce policies

and practices

Section 4:
Audit, risk and
internal controls

M Financial reporting External

Auditor & Internal audit

N Review of 2020
Annual Report

O Internal financial controls

Risk management

See
page

Section 2:
Division of
responsibilities

F Board roles

G Independence

H External commitments
and conflicts of interest

Board efficiency: key
activities of the Board

Section 5:
Remuneration

P Linking remuneration with

purpose and strategy

Q Remuneration
Policy review

R Performance outcomes
in 2020 Strategic targets

See
page

101

Read more in the Audit and Risk Committee
Report on pages 82 to 87

Read more in the Remuneration Committee
Report on pages 88 to 107

Strategic reportGovernanceFinancial statementsOther information

B O A R D L E A D E R S H I P A N D C O M P A N Y P U R P O S E

Maintaining good governance is essential
to support the delivery of Alfa’s strategic
objectives, and to ensure that the business
is run well for the benefit of all stakeholders
and sustainable long-term value. The Board
continues to monitor the framework so
it remains appropriate to the business.

The governance framework embeds
our values into the policies and processes
of Alfa and therefore helps to strengthen
the corporate culture.

Read more about our Company
Leadership Team on page 68.

During this year the Board has reviewed
and approved an updated Schedule of
Matters Reserved for the Board, Board
Committee Terms of Reference and
Delegations of Authority Policy. There is
an internal controls system in place which
allows the Board to assess and manage
risks to the business.

Read more about our Risk Management
on pages 42 to 43 and the Audit and Risk
Committee Report on pages 82 to 87.

The Board provides support in implementing
strategic priorities as well as oversight and
constructive challenge on the running of the
business. Through reporting, including the
use of both financial and non-financial
metrics, the Board is able to evaluate and
guide the progress and performance of the
Company. Reports from across the business
are provided at Board meetings to update
the Board and enable effective discussion.

Defining purpose
and creating value
During the year, the Company has
continued to embed across the business
the purpose and values as set out in the
Strategic report on pages 1 to 63
of this report.

The Board continues to monitor the
strategic direction of the Company and
the key investments we need to make
to remain in a leading position in an
ever-changing market, and ensures we
have the resources and the right people,
in the right place operationally, to ensure
we remain relevant to the markets in
which we operate.

The Board and Company Leadership Team
(CLT) embed the Company’s values across
the business. In order to monitor whether
our culture is and remains aligned with our
values, the Company seeks feedback from
customers and potential customers on
how the values have been received and
how they have been experienced during
the sales process; and through the various
stages of software implementations and
provision of ODS services.

Governance framework
The Board is made up of a majority of
independent directors whose diverse
experience enable appropriate debate
and challenge at Board and Committee
discussions. The Board has an approved
governance framework of systems and
controls which enables the effective
discharge of the Board’s responsibilities.
Directors have a duty to promote the
success of the Company under section 172
of the Companies Act 2006, the Company’s
section 172 statement can be found on
page 52, and this framework supports our
directors’ compliance with their duties.

Board engagement
The Board recognises its responsibilities
to engage with and incorporate the
views of key stakeholders in strategic
planning and decision-making, and
the importance of stakeholder trust
in building resilience and long-term
sustainability. Although the Board retains
overall responsibility for stakeholder
engagement there is interaction at various
levels of the business so that it is carried
out by those most relevant to a particular
stakeholder group or particular issue.
Our section 172 statement and ‘How we
engage with our stakeholders’ section on
pages 52 to 55 sets out the main interests
of key stakeholders and the ways in which
Alfa engages with them.

The Board recognises the importance of
considering all stakeholders in its decision-
making, although the weight given to each
stakeholder group may vary depending
on the subject in question.

Through engagement and greater
understanding of the interests of
stakeholders, the Board is able to
assess the long-term consequences
of decisions on stakeholders and
the business. We continue to work
on embedding practices across Alfa
so that consideration of stakeholder
interests in decisions is second nature
at all levels of the business.

Workforce engagement
The Board has a specific role in identifying,
monitoring and assessing the impact
of the Company’s engagement with its
key stakeholder groups, particularly
in relation to workforce engagement.
In 2020 the Board continued with its
approach of an alternative arrangement
to understand the views of the wider
workforce. Unfortunately during the
year, due to the Covid-19, workforce
engagement activities were scaled down.
The Board met virtually with the whole
Company in August 2020, during an all
employee town hall.

The Company increased its engagement
activities with employees, digitally and
through social media, during this time,
involving the CLT at every opportunity.
Regular reports were provided to the
Committee detailing the engagement
activities and a number of ‘pulse’ surveys
were distributed during the year asking
for feedback from employees on the
Company’s positioning. Feedback results
and direct comments were provided to the
Board. The Company continued its focus
on the importance of the wellbeing of our
workforce and this has been heightened
during the pandemic with additional
challenges for our newly remote workers.
We have introduced a number of new
initiatives to provide support for wellbeing
including redirected internal time to
develop a rich programme of wellbeing
resources, activities and events to support
our employees through a difficult period.

Engagement with shareholders
Alfa is committed to engaging with
shareholders and prospective investors
to inform and aid understanding of its
strategy and progress. The focus of all
communications is ensuring transparent,
detailed and meaningful information.
The Chairman has overall responsibility
for ensuring that the Company has
appropriate channels of communication
with its shareholders and is supported in
this by the Senior Independent Director
and the Executive Directors.

Shareholders are consulted on a variety
of issues, as appropriate, such as the
medium-to long-term strategy of the
Company, current trading and market
conditions and Directors’ remuneration.
The Board regularly receives feedback
from the Group’s brokers, advisors and the
Executive Directors on the views of major
shareholders and the investor relations
programme, and also receives reports
on significant changes to the composition
of the Group’s share register.

Due to the pandemic the usual
direct engagement mechanisms with
shareholders have been curtailed but the
Directors have continued communications
virtually through one-to-one meetings
and responding to specific shareholder
queries and provided digital presentations,
including for the half-year results
announcement. Given the restrictions
on travel and large gatherings, and the
guidance available to us at the time, we
took the decision to hold the 2020 AGM
behind closed doors. As we approach
our 2021 AGM, we will continue to
monitor the situation, and will prioritise
the health and safety of the Board, our
colleagues and of course our shareholders.
Further details will be provided when our
Notice of AGM is published in April 2021.
The Remuneration Committee Chair also
engaged with key investors and proxy

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
advisory firms on our new Directors’
Remuneration Policy and approach in
respect of the 2020 performance year.

The Group’s investor relations microsite
www.investors.alfasystems.com is updated
throughout the year, providing the annual
and interim reports, presentations given
to analysts and investors, trading updates
and other regulatory announcements,
and up to date information on the Group’s
activities. Shareholders are able to contact
the Company through the Company
Secretary, at the Company’s registered
office, which is shown on the Directors’
report on page 109.

Shareholder agreement
The relationship between the Board
and the controlling shareholder of the
Company (the ‘Controlling Shareholder’),
CHP Software and Consulting Limited, is
governed by the Relationship Agreement
(which was executed on 26 May 2017).
This agreement is a framework under
which the Controlling Shareholder, and
the shareholders of the Controlling
Shareholder will operate to protect the
rights of the non-controlling shareholders.
There have been no changes to the
Relationship Agreement during 2020,
or up to the date of this report.

Under the Relationship Agreement: Two
Non-Executive Directors can be appointed
to the Board for as long as the Controlling
Shareholder holds 20% or more of the
voting rights over the Company’s shares;

• One Non-Executive Director can be
appointed to the Board for so long as
the Controlling Shareholder holds 10%
or more but less than 20% of the voting
rights in respect of the Company’s
shares; and

• If none of the Controlling Shareholders

are members of the Nomination
Committee, the Controlling Shareholder
can appoint an observer to the
Nomination Committee.

Andrew Page is designated as the first
appointed Director of the Controlling
Shareholder. Andrew Denton has not
been appointed as a designated Director
by the Controlling Shareholder. It has been
agreed that for as long as the Controlling
Shareholder has the right to appoint two
Directors to the Board, and whilst Andrew
Denton is a Director of the Company, the
Controlling Shareholder will not exercise
its right to appoint a second Director to
the Board. There have been no Board
observers appointed either under the
Relationship Agreement, or otherwise.

For further details of the Relationship
Agreement, see page 111 of the
Directors’ report.

Workforce engagement

Since the start of the pandemic, regular
town halls and electronic updates to all
employees from CEO Andrew Denton
have proven to be a very successful
engagement mechanism. Andrew Denton
and the CLT update the workforce on all
aspects of the business and take direct
questions in real time from employees.

“ Employee engagement is a key focus for the

Board. The Board ensures that by considering
employees in our decisions and communicating
these decisions clearly, our employees are happy,
motivated and empowered to be play a pivotal
part in the success of the business.”

Charlotte de Metz
Non-Executive Director

Strategic reportGovernanceFinancial statementsOther information72

B O A R D L E A D E R S H I P A N D C O M P A N Y P U R P O S E C O N T I N U E D

Workforce policies
and practices
Our people bring a diverse range of
experience, expertise and perspectives
that contribute to the values and culture
of Alfa and are essential for the delivery
of our strategic objectives. A positive
environment where our people feel valued,
motivated and able to thrive are essential
to Alfa’s continued success. The Board
recognises the value of, and supports,
significant investment of time and
resources in our workforce to allow
Alfa to attract and retain talent and
develop the skills of our employees.

One central policy in creating this
environment and culture is Alfa’s Ethics
and Code of Conduct (the ‘Code of
Conduct’) which clearly sets out a zero-
tolerance policy for dishonest and corrupt
behaviour among our employees and seeks
to educate team members on unlawful
and unethical conduct. Compliance with
the policy maintains Alfa’s reputation in
the marketplace as well as our relationship
with our colleagues, investors, customers
and other stakeholders.

The Code of Conduct provides clear
guidance to employees in respect of legal
and ethical issues which they may come
across while conducting Alfa business,
and what Alfa expects in respect of our
employees’ behaviour, and provides
important information on working at
Alfa to help embed the behaviours
and values alongside more practical
information to enable our employees
to work effectively and efficiently.

The Board is responsible for overseeing
the Company’s arrangements for the
workforce to be able to raise matters
of concern and seeks to foster an
environment where individuals can be
confident about speaking up about concerns
without fear of retaliation. The Board
monitors this area through reports on
the number and types of concerns raised
through the whistleblowing process and
the outcomes of the concerns raised.

Alfa is focused on the importance of the
wellbeing of our workforce and this has
been heightened during the pandemic with
additional challenges for our newly remote
workers. We have introduced a number
of new initiatives to provide support for
wellbeing, including enhancing our paid
carer leave allowance for parents having
to care for and educate their children; and
we made available a working from home
allowance to ensure that working from
home was both safe and a comfortable
experience for our people. We have
implemented a new induction programme
designed to take place remotely that has
been successfully utilised as we have
continued to hire during the pandemic.

Alfa is fully committed to maintaining
high standards of ethical and professional
conduct for the Company and its employees.
We have a number of policies in effect
which are designed to create an
environment and culture where:

• Employees’ health, safety, rights and
wellbeing are placed at the heart of
the way the Group does business;
• Employee diversity and inclusion

is celebrated;

• Employees must act ethically, honestly
and stand up for what is right; and
• Communication across the business

should be open, honest and responsible.

To support the Code of Conduct and
our values, Alfa has a number of other
workforce policies and practices covering:

• Business expenses;
• Confidentiality;
• Health and safety;
• Diversity and inclusion;
• Harassment;
• Share dealing; and
• Whistleblowing.

We seek to embed our Code of Conduct
through continuing communications,
training and appropriate controls.
The Code of Conduct and all other
workforce policies and procedures can
be found and easily accessed by our
employees through our intranet site.

Whistleblowing
We recognise that our people are our
strongest assets for detecting and
avoiding legal and ethical failure within
our business. Our whistleblowing policy
and team provides a safe environment
to report concerns regarding illegal,
unethical or improper behaviour.
The Group’s Whistleblowing Policy
clearly explains to employees how they
can raise concerns directly to the Group’s
Whistleblowing Officer. All whistleblowing
cases are formally investigated by the
Whistleblowing Officer and reported
regularly to the Audit and Risk Committee
and the Board, and the Board is responsible
for reviewing the effectiveness of actions
taken in response to concerns raised.
Where necessary, external specialist
third parties, or other members of staff,
with appropriate experience, may be
appointed to help investigate issues
that have been raised.

Share dealing code
Alfa has adopted a share dealing code
which applies to all employees and
provides further restrictions on the
Company’s Directors, its other PDMRs
and certain persons deemed insiders.
In accordance with the Market Abuse
Regulation, the Directors and PDMRs
have confirmed to the Company they are
responsible for procuring the compliance
of their respective connected persons
with the Alfa share dealing code.
The share dealing code has been
published on the Alfa intranet and
guidance and communication is
provided to all new starters and
the Alfa team on an ad hoc basis.

Suppliers and modern slavery
We do not support any form of slavery,
human trafficking or child labour and
we only work with suppliers that have
been assessed through our internal
processes to be ethical providers.
We have an ethical procurement policy
and our key procurement personnel
have been trained in relation to the
relevant requirements and regulations.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202073

D I V I S I O N O F R E S P O N S I B I L I T I E S

Division of responsibilities
Alfa is led and controlled by the Board
which is collectively responsible for the
long-term and sustainable success of
the Group. The structure of the Board,
and management, roles and Committees
ensures controls and oversight with
a balanced approach to risk aligned
with Alfa’s culture. The structure
assists the Board with carrying out
its responsibilities and is designed
to ensure that the Board focuses on
strategy, monitoring the performance
of the Group and governance, risk
and control issues.

Board and Committee
meetings and attendance
During the year, due to the pandemic, the
Board and its Committees have conducted
meetings both in person and remotely
through video calls to enable the Board
to continue to function and maintain
the integrity of our governance structure.

In the event that a Director was unable to
attend a meeting they still received all the
papers for the meeting and were updated
on matters discussed at the meeting.

• Ensuring that the necessary financial
and human resources are in place for
the Group to meet its objectives; and

• Reviewing the Group’s culture

supported by its values.

Responsibility of the Board
The Board is collectively responsible
for the long-term success of the Group
and for ensuring leadership within
a framework of effective controls.
The key roles of the Board are:

• Setting the strategic direction of

the Group;

• Overseeing implementation of the
strategy by ensuring that the Group
is suitably resourced to achieve its
strategic aspirations;

• Providing entrepreneurial leadership
within a framework of prudent and
effective controls which enables risk
to be assessed and managed;

How the Board operates
During the year, the Board considers a
comprehensive programme of regular
matters covering operational and financial
performance reporting, strategic reviews
and updates, and various governance
reports and approvals.

Board meetings
The Board held seven scheduled meetings
in 2020 and eight ad hoc meetings, for
specific approvals and discussions.
If Directors are unable to attend a
meeting, they have the opportunity
beforehand to discuss any agenda
items with the Chairman.

The following diagram shows the role of the Board and its Committees and Company Leadership Team:

Board of Directors

The Board is collectively responsible for the long-term success of the Company. The business of the Company is managed by the
Board who may exercise all of the powers of the Company. The Board has a formal schedule of matters reserved for the Board’s
decision-making which is available on the Company website. Although the Board retains overall responsibility, it delegates certain
matters to the Board Committees, and the detailed implementation of matters approved by the Board and the day-to-day
operational aspects of the business to the Company Leadership Team.

Audit and Risk Committee

Nomination Committee

Remuneration Committee

Reviews and reports to the Board on
the Group’s financial reporting, internal
control and risk management systems.
Monitors the independence and
effectiveness of the external auditor
and the effectiveness of the internal
audit function.

Provides succession planning for the
Board and leads the process for all Board
appointments. Keeps under review the
membership and composition of the
Board, including the combination of skills,
experience and diversity, and ensures it
remains appropriate.

Determines the remuneration, bonuses,
long-term incentive arrangements,
contract terms and other benefits in
respect of the Executive Directors, the
Chairman, the Company Secretary and
senior management. Oversees the
remuneration and workforce policies
and takes these into account when setting
the policy for Directors’ remuneration.

The Company Leadership Team is responsible for the day-to-day running of the business, carrying out and overseeing operational
management, and implementing the strategies the Board has set.

Company Leadership Team

Executive Committees

These governance Committees are chaired by an Executive Director and report to the Executive Group, and the Board or Board
Committees as appropriate.

Investment Committee

Disclosure Committee

Deal Committee

The Investment Committee determines
the Strategic Investment initiatives that
should be undertaken. The Committee
provides a structure through which effective
decisions can be made on the priority
and scheduling of Strategic Investment
initiatives. The Committee ensures that
Strategic Investment initiatives align with
Alfa’s business strategy.

The Disclosure Committee determines
whether information that is submitted
to it requires disclosure and determines
any other issue relating to the application
of the Disclosure Procedures that
are required.

The Deal Committee determines
standard guidelines for an acceptable
deal in terms of financial position and
key contractual terms.

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D I V I S I O N O F R E S P O N S I B I L I T I E S C O N T I N U E D

The Board responsibilities
We have clear and documented roles and separation of duties between the Chairman and the CEO. The Alfa CEO, Andrew Denton,
is responsible for determining the Alfa strategy and day-to-day operations, and leading the CLT, which assists in the day-to-day
delivery of this strategy and general operations. Andrew Page, as Chairman, provides oversight and guidance to Andrew Denton
on the strategic direction, key commercial and contracting decisions in addition to his responsibilities for running an effective Board.

The division of responsibilities between our board members is set out below:

Role

Principal responsibilities

Executive Chairman
Andrew Page

Manages and provides leadership to the Board.

Acts as a direct liaison between the Board and
management, working with the CEO to assist the
flow of information.

Ensures that the Directors have sufficient information
to enable them to form appropriate judgements.

Chief Executive Officer
Andrew Denton

Responsible for the day-to-day management of Alfa.

Responsible for defining the strategy and guiding
the CLT on its strategy execution, once this has
been agreed by the Board.

Creates a framework that optimises resource
allocation to deliver strategic objectives over
varying timeframes.

Chief Financial Officer
Duncan Magrath

Overall management of the financial risks of the Group.

Responsible for financial planning and record-keeping, as
well as financial reporting to the Board and shareholders.

Chief Operating Officer
Matthew White

Responsible for day-to-day operational activities.

Responsible for software development.

Responsible for systems implementation delivery.

Responsible for delivery of HR resourcing and planning.

Senior Independent
Director
Chris Sullivan

An Independent Non-Executive Director.

Provides a sounding board for the Chairman and CEO.

Non- Executive Directors
Steve Breach
Adrian Chamberlain
Charlotte de Metz

Provide constructive challenge to the Executive Directors.

Help develop proposals on strategy.

Scrutinise management’s performance in meeting
agreed goals and objectives.

Monitor performance reports.

Develops and sets the agendas for
Board meetings, working with the
CEO and Company Secretary.

Recommends an annual schedule of
Board and Committee meetings.

Ensures effective communications with
shareholders and other stakeholders.

Ensures the successful delivery against
plan and other key business objectives,
allocating decision-making and
responsibilities accordingly.

Identifies and executes new business
opportunities and assesses potential
acquisitions and disposals.

Manages the Group with reference
to its risk profile in the context of
the Board’s risk appetite.

Ensures effective financial compliance
and control, while responding to
regulatory developments, including
financial reporting, effective allocation
of capital, management of liquid
resources, investor relations and
corporate responsibility.

Develops key business operational
model, monitoring performance
against key performance indicators
and ensuring adequate staffing
recruitment to deliver development
and systems implementation.

Serves as an intermediary for the
other Directors and shareholders
when necessary.

Is available to shareholders if they
have concerns.

Satisfy themselves regarding the integrity
of financial information, and that controls
and risk management systems are robust
and defensible.

Determine appropriate levels of
remuneration for Executive Directors.

Appoint and remove Executive
Directors as required and review
succession planning.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Board and Committee meetings and attendance
During the year, due to the pandemic, the Board and its Committees have conducted
meetings both in person and remotely through video calls to enable the Board to
continue to function and maintain the integrity of our governance structure. In the
event that a Director was unable to attend a meeting they still received all the papers
for the meeting and were updated on matters discussed at the meeting.

Andrew Page

Andrew Denton

Duncan Magrath

Matthew White

Steve Breach

Adrian Chamberlain1, 2

Charlotte de Metz1

Chris Sullivan

Board

Audit and Risk
Committee

Nomination
Committee

Remuneration
Committee

7/7

6/6

7/7

5/6

6/6

7/7

2/2

0/1

1/1

2/2

5/5

4/4

5/5

3/3

2/2

3/3

Adrian Chamberlain and Charlotte de Metz were appointed to the Board and as Members of the
Audit and Risk, Nomination and Remuneration Committees on 24 April 2020.

Adrian Chamberlain was unable to attend the Board and Nomination Committee meetings held on
4 November 2020, due to prior commitments of which he had notified the Company prior to his appointment.

Matters reserved for the Board
The Board has a formal schedule
of matters specifically reserved for
its decision-making and approval.
The matters that the Board considers
suitable for delegation are contained
in the Terms of Reference of each
Board Committee.

There are certain key responsibilities that
the Board does not delegate and which
are reserved for its consideration. The full
Schedule of Matters Reserved for the
Board is available under the Corporate
Governance section on our website.

Business
strategy and
approval of
long-term
aims and
objectives

Group
financial
reporting
and results
announcements

Major capital
commitments

Company’s
purpose,
values, vision
and culture

Risk
management
and internal
controls

Board

Corporate
governance
including Board
and Committee
evaluation

Material
acquisitions
and disposals

Engagement
with key
stakeholders

Approval of
Annual Report
and Accounts

External commitments
and conflicts of interest
The Company is mindful of the time
commitment required from Non-Executive
Directors in order to effectively fulfil their
responsibilities on the Board, particularly
providing constructive challenge and
holding management to account and
utilising their diverse skills and experience
to benefit the Company and provide
strategic guidance.

Prior to their appointment, prospective
Directors are asked to provide details of
any other roles or significant obligations
that may affect the time available for them
to commit to the Company. The Chairman
and the Board are then kept informed by
each Director of any proposed external
appointments or other significant
commitments as they arise. These are
monitored to ensure that each Director
has sufficient time to fulfil their obligations
and Chairman approval is required prior to
a Director taking on any additional external
appointment. Each Director’s biographical
details and significant time commitments
outside of the Company are set out in the
Board biographies on pages 66 to 67.

Whenever a Director takes on additional
external responsibilities, the Director
will discuss the potential position with
the Chairman and confirm that, as far
as they are aware, there are no conflicts
of interest.

Each Director is required to disclose
conflicts and potential conflicts to the
Chairman and the Company Secretary
as and when they arise. As part of the
induction process, a newly appointed
Director is asked to disclose any conflicts
of interest to the Company. Thereafter,
each Director has an opportunity to
disclose conflicts at the beginning of each
Board and Committee meeting and as part
of an annual review. None of the Directors
declared to the Company any actual or
potential conflicts of interest between
any of his or her duties to the Company
and his or her private interests and/or
other duties, except in the case of the
Executive Directors, each of whom holds
the position of Director of the Company
and Director of a number of Group
subsidiary companies.

The Companies Act 2006 provides that
Directors must avoid a situation where
they have, or can have, a direct or indirect
interest that conflicts, or possibly may
conflict, with the Company’s interests.

Boards of public companies may authorise
conflicts and potential conflicts, where
appropriate, if their company’s articles
of association permit.

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D I V I S I O N O F R E S P O N S I B I L I T I E S C O N T I N U E D

Key activities of the Board in 2020

Focus area

Key stakeholders Activities

Link to strategic
priorities

Strategy and operations
see pages 1 to 63

Customers
Employees
Partners
Investors

Leadership, people
and culture
see pages 12 to 15
and 56 to 59

Employees
Investors

Finance
see pages 36 to 41

Customers
Employees
Community and
Environment
Partners
Investors

Governance
see pages 69 to 112

Employees
Customers
Investors

• Applying the Board’s strategic

understanding of principal risks to
key challenges and opportunities.

• Monitoring the performance of
the Company against agreed
strategic objectives, including
key financial targets.

• Receiving updates on employee
views and engagement levels.
• Maintaining and enhancing Alfa’s

culture and values.

• Continuing to monitor senior
executive talent management
and development plans to provide
succession for all key positions.

• Reviewing and approving

the budget.

• Reviewing financial key

performance indicators (KPIs).

• Approving full-year results,

half-year results, trading updates
and the Annual Report.

• Approving a special dividend.
• Reviewing the key risks to Alfa and
the controls in place for mitigation.

• Considering and monitoring the

Group’s risk appetite and principal
risks and uncertainties.

• Approving the viability and going

concern statements.

• Monitoring and reviewing

the Company’s approach to
corporate governance, its
key practices and its ongoing
compliance with the 2018 Code.

• Reviewing the results

from the internal Board
effectiveness evaluation.

• Approving updated Committees’

Terms of Reference.

• Receiving and considering feedback
from shareholder engagement.

• Reviewing and approving the
modern slavery statement.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
C O M P O S I T I O N , S U C C E S S I O N A N D E VA L U AT I O N

The Board determined that, going
forwards, a performance evaluation
should be carried out by an external
facilitator once every three years, as
required by the 2018 Code, with the
first performance evaluation to be
conducted by an external facilitator
no later than 2021.

Summary of
performance evaluation
In 2020, an internal performance
evaluation was carried out, by way
of questionnaire, identifying areas of
strength and weakness. The questionnaire
was structured to provide a rounded
review of the Board’s performance and
ensure a direct comparison with the
previous year, allowing the Board to
identify improving or declining trends
and monitor the effectiveness of the
steps taken to address the previous
year’s findings. The 2020 performance
evaluation, which was discussed by the
Board, concluded that the Board is highly
engaged with strong shareholder focus
and clear alignment to vision and strategy,
making for constructive and challenging
debate. There is a culture of open
communication, mutual trust and respect
for each other’s opinions and industry
knowledge. The Board agreed on the
below steps to be taken during 2021.

Appointments to the Board
The Nomination Committee leads the
process for Board appointments and
makes recommendations to the Board
and also ensures that succession plans
are in place for the Board and senior
management. The formal procedure
for Board appointments and succession
planning is detailed in the Nomination
Committee Report on pages 79 to 81.

Director re-election
Each Director is required under the
Articles of Association to retire at every
Annual General Meeting and submit
themselves for re-election by shareholders.

At the 2020 Annual General Meeting
(AGM) of the Company, all of the current
Directors stood for reappointment, and
were duly elected with majorities ranging
from 99.55% to 100% of the votes cast.

All the Directors will retire and seek
re-election at the 2021 AGM of the
Company. This report and in particular
the Board biographies on pages 66 to 67
sets forth the contribution of each
Director on the Board to the Company
and on this basis the Board, and
specifically the Chairman, believes each
Director proposed for re-election at the
AGM should be reappointed. The Board
has based its recommendations for
re-election or election, in part, on its
review of the results from the Board
evaluation process outlined on pages 77
and 78, and the Chairman’s review of
individual evaluations, and whether a
Director has demonstrated substantial
commitment to the role (including time
for Board and Committee meetings
noted in this report) and other
responsibilities, taking into account
a number of considerations including
outside commitments and any changes
thereof during the period.

2020 evaluation

Board composition
The composition of the Board and Board
Committees is continually assessed to
ensure an appropriate balance of skills
and experience is maintained. The Board
takes into account various considerations
in assessing the composition of the
Board including length of Director tenure,
Board diversity, independence and the
combination of skills and experience of
the Directors. The appointment of Adrian
Chamberlain and Charlotte de Metz this
year has further strengthened the Board
due to their business experience as well
as extensive leadership experience.

Board evaluation
The Directors completed a detailed Board
performance evaluation questionnaire as
part of the annual performance evaluation
process. Given the recent appointment of
two additional Non-Executive Directors and
a new Chief Financial Officer, the Board
considered that an external evaluation
would be more beneficial in 2021 once the
newly appointed Directors are more firmly
established, and that the 2020 evaluation
should therefore be carried out internally.
Each questionnaire was analysed and a
summary of the results and the Board’s
performance was presented to the Board
for discussion. The Board considers this
exercise to be of significant value, and
focus is placed on reviewing the quality
of information provided to the Board at
the Board’s discussions, the effectiveness
of the Board, the composition of the
Board, including the skillset of the various
Directors, highlighting whether there
are any gaps in the breadth and depth
of the Board that should be addressed by
the Nomination Committee as part of its
succession planning, and to ensure that
the Board is best placed to deliver on its
strategic goals and ensure the long term
sustainable success of the Company.

Objectives for 2021

Steps to be taken during 2021

Reviewing our stakeholder
engagement mechanisms in
relation to the 2018 Code.

The interests of our stakeholders are central to the way we operate as a company.
The Board will review the ways in which we engage with them to ensure that they
facilitate dialogue and that the interests of our stakeholders are always considered
in our decision-making.

Continuing to set and monitor
our corporate culture.

The Board will continue to ensure that the policy, practices and behaviours
throughout the business are aligned with the purpose, values and strategy of Alfa.

Promoting opportunities for
formal/technical training and
ensure that regular updates are
provided on technological and
business developments.

When a specific training need is identified, where appropriate, such training is
delivered by the topic being included at a Board meeting so that all Directors can
benefit. Alternatively, training is delivered by way of formal presentations, individual
meetings and site visits in order to learn more about a particular initiative or project.

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The Board is mindful of the aims of
the Hampton-Alexander Review, an
independent review body which aims to
improve women’s representation at board
level and in leadership roles. This principle
of Board diversity is strongly supported
by the Board, recognising that diversity
of thought, approach and experience is
an important consideration as part of the
selection criteria used to assess candidates
to achieve a balanced Board.

The Board is also mindful of the aims of
the Parker Review, an independent review
body dedicated to improving the ethnic
and cultural diversity of UK boards to
better reflect their employee base and
the communities they serve. The business
currently has no director from an ethnic
minority background either on the Board
or the Executive Committee.

The Board considers that each Director
is able to allocate sufficient time to
the Company to discharge their
responsibilities effectively.

Board composition and diversity
As required by the Code, at least 50% of
the Board, excluding the Chairman, are
independent non-executive Directors. As at
31 December 2020, the Board comprised
the Executive Chairman, three Executive
Directors and four Independent Non-
Executive Directors. The Board considers
that all the Non-Executive Directors, on
appointment, are independent.

It is the Board’s policy that appointments
to the Board will always be based solely on
merit without any discrimination relating
to age, gender or any other matter that has
no bearing on an individual’s ability to fulfil
the role of Director.

Diversity overview

Board composition

Board tenure

Average age of the Board

Executive Chair

Executive

Independent

13%

37%

50%

0-1 year

1-2 years

2-3 years

3-4 years

37%

13%

40-49

50-59

60-69

38%

24%

Gender diversity Board

Gender diversity
Company wide

Gender diversity
Senior manager

Male

Female

87%

13%

Male

Female

68%

32%

Male

Female

84%

16%

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020R E P O R T O F T H E N O M I N AT I O N C O M M I T T E E

“ A key focus for the Nomination Committee
was to continue to monitor the succession
of the Board, Company Leadership Team
and senior management talent pool to
ensure succession planning for business
critical roles is proactively reviewed.”

Chris Sullivan
Chair of the Nomination Committee

Dear shareholders,
I am pleased to introduce the Nomination
Committee (the ‘Committee’) Report for
2020 which summarises our key activities
during the year.

During 2020, the Committee continued
to focus on the depth and breadth of
the Board, the Company Leadership
Team and senior management succession
as a key priority. As highlighted in my
2019 report, following a review of
the Board composition, the Committee
recommended the appointments of
Adrian Chamberlain and Charlotte
de Metz to the Board in April 2020.
Further information on Adrian and
Charlotte’s appointments is set out
on the next page. I am delighted
to welcome Adrian and Charlotte to
the Board and welcome the quality
insight and contribution that they
have provided since joining.

The Committee maintains a well defined
specification for each appointment, with a
clear understanding of the values required
to help the effective functioning of the whole
Board. When considering the composition
of the Board, we reviewed the skills and
experience required to fulfil the Board’s
strategy, to make suitable recommendations
based on those key attributes.

The Nomination Committee reviewed
the membership of all of the Board’s
Committees following the appointment
of Adrian and Charlotte and it was
recommended that Adrian be appointed
as Chair of the Remuneration Committee
and as a member of the Audit and Risk
and Nomination Committees, and that
Charlotte be appointed as a member
of the Audit and Risk, Nomination and
Remuneration Committees.

The Committee led the search for the
appointment of a new Chief Financial
Officer. In March 2020 the Board confirmed
the appointment of Duncan Magrath,
who joined the Board in April 2020.

Succession planning
Succession planning for the Executive
Directors and Company Leadership
Team (CLT) is a particular focus of the
Committee. In addition, the Committee
has continued to monitor the CLT and
senior management talent pool to ensure
that succession planning for business-
critical roles is proactively reviewed.
The Board considered the implications
of the new requirements relating to the
development of a diverse pipeline for
succession for the Board and the CLT
contained within the 2018 Code.

Chris Sullivan
Chair of the Nomination Committee

Principal activities in 2020
• Identified and nominated two

suitable Non-Executive Directors
and the CFO to be appointed to
the Board.

• Reviewed the structure, size

and composition of the Board
and its Committees.

• Considered wider elements of
succession planning for Board
and the levels below, including
how to increase diversity.
• Evaluation of Directors (all of

whom are proposed for re-election
at the AGM).

Areas of focus for 2021
• Monitor Board composition

for alignment of relevant skills,
experience and diversity to
Company strategy.

• Oversight of the CLT’s development

and succession planning.

Attendance at Nomination
Committee meetings

Chris Sullivan (Chair)

Steve Breach

Adrian Chamberlain1, 2

Charlotte de Metz1

Andrew Page

Meetings
attended

2/2

0/1

1/1

2/2

Adrian Chamberlain and Charlotte de Metz
were appointed on 24 April 2020 as members
of the Nomination Committee.

Adrian Chamberlain was unable to attend the
meeting held on 4 November 2020, due to
prior commitments of which he had notified
the Company prior to his appointment.

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Role of the Committee
The Nomination Committee is responsible
for ensuring that the Board and its
Committees have the appropriate balance
of skills, knowledge and experience to
effectively lead the Company both
now and in the future. This is achieved
through effective succession planning, the
identification and development of internal
talent and a clear understanding of the
competencies and capabilities required
to support the delivery of Alfa’s strategy.

The Committee undertakes comprehensive
reviews of the leadership needs of the
Company, from both Executives and
Non-Executives, to ensure the continued
ability of the organisation to compete
effectively in the marketplace, and
keeps informed of the strategic issues
and commercial challenges affecting
the Company and the market in which
it operates.

The Committee regularly undertakes a
review of its Terms of Reference to ensure
that it reflects the actual role carried out
by the Committee and that it is operating
effectively. The Board reviewed and
approved revised Terms of Reference in
December 2020. The Terms of Reference
and its operation for the Committee
mostly captured the new requirements
set out in the 2018 Code, and therefore
only minor changes were required.

Committee membership
During the year the Committee carried
out a review of the composition of
the Committees to take into account
the new Board members and made
recommendations for changes to the
membership of the three Committees.
Adrian Chamberlain was appointed as
Chair of the Remuneration Committee
having served as the Remuneration Chair
of Volex plc for four years. In addition,
Adrian Chamberlain was appointed
as a member of the Audit and Risk and
Nomination Committees. Charlotte de
Metz joined as a member of the Audit
and Risk, Nomination and Remuneration
Committees, upon appointment.

Appointment of Directors
There is a formal, rigorous and transparent
procedure for the appointment of new
Directors under which the Committee is
responsible for leading this process and
making recommendations to the Board.
The search process for new Non-Executive
Directors is to appoint an external search
firm to secure a strong and diverse list of
candidates. A shortlist of candidates is
shared with the Committee, meetings are
scheduled and then, once the candidates

have been identified, confirmation
is provided of the time commitment
required and disclosure of any other
business interests. If discussions relate
to the appointment of a Chairman then
Chris Sullivan, as Senior Independent
Director, will lead the recruitment
process. When the Committee has
found a suitable candidate, the Chair
of the Committee makes a proposal
to the whole Board, which retains
responsibility for all such appointments.

The Committee, on behalf of the Board,
regularly assesses the balance of Executive
and Non-Executive Directors, and the
composition of the Board in terms of skills,
experience, diversity and capacity. For the
appointments of Adrian Chamberlain and
Charlotte de Metz, Norman Broadbent
Executive Service Limited (Norman
Broadbent) was appointed to lead
the search for the new Non-Executive
Directors. Norman Broadbent does not
have any other connection with any of
the Directors, or the Company. Working
with the Committee, Norman Broadbent
developed a candidate specification and
drew up a shortlist of suitable candidates
for the additional Non-Executive Director
role, each of which was subject to a
three-stage process including interviews
with all the Board members.

In 2019, the Committee appointed
FDU Group Limited to lead the search
for the appointment of a new Chief
Financial Officer. In March 2020 the
Board confirmed the appointment of
Duncan Magrath, who joined the Board
in April 2020. FDU Group Limited has
no other connection to the Company
or its Directors.

Diversity
Alfa seeks to have a workforce which
reflects the world we and our customers
live in, whilst facilitating the delivery of
our strategic goals. The Board and the
Committee believe that diversity is a
wider topic than simply gender and,
in order to achieve the Group’s future
growth aspirations, Alfa should remain
committed to building a pipeline of
diverse talent and regularly reviewing
HR processes, including recruitment and
performance management frameworks.

The Committee will take into account a
variety of factors before recommending
any new appointments to the Board,
including relevant skills to perform the
role, experience, knowledge and diversity.
Alfa endeavours to achieve appropriate
diversity, including gender diversity,
throughout the Company.

The Committee embraces the importance
of inclusion and diversity and supports
the recommendations of the Hampton
Alexander Review on gender and the
Parker Review on ethnic diversity.
However, we acknowledge that currently
our Board does not comply with the
recommendations and recognises that
there is always more we can do, and will
continue to work to build a more inclusive
workplace at all levels of the Company.
It is part of the Committee’s remit when
making new Board appointments to
consider the importance of diversity on
the Board, including gender and ethnicity.
This is considered in conjunction with
experience and qualifications in relation to
the balance of the Board and its Committees.

Board succession
The Committee keeps under review
the leadership needs of the organisation,
both the Executive and Non-Executive
Directors, with a view to ensuring the
continued ability of the organisation to
compete effectively in the marketplace.
In addition, the Committee reviews
the succession plans for the Company
Leadership Team and the senior
management structure, and employees
identified by management as having the
potential to develop in the longer term
into future leaders of the business,
taking into account future challenges
and opportunities.

Independence
During 2020, the Committee reviewed
the balance of skills, experience and
independence of the Board. For Non-
Executive Directors independence
in thought and judgement is vital to
facilitating constructive and challenging
debate in the boardroom and is essential
to the operational effectiveness of the
Alfa Board and its Committees.

The Committee is satisfied that
the external commitments of the
Board’s Chairman and members do not
conflict with their duties as Directors
of the Company. After the year end,
the Committee also considered the
Directors proposed for re-election
by shareholders at the AGM. Following
discussion of the skills and contribution
of each Director, and in conjunction
with the Board performance evaluation,
the Committee supports the proposed
re-election of all Directors standing
for re-election at the AGM in 2021.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202081

Induction and ongoing
professional development
To ensure that each Director receives
appropriate support on joining the
Board, there is a comprehensive and
tailored induction programme, including
the provision of background material on
the Company and briefings with relevant
CLT members. The induction programme
will continue to be reviewed and updated
on a regular basis.

For professional ongoing development,
the Board receives presentations relevant
to the Company’s business and updates
on any changes to markets, or regulations,
which may affect the Company’s operations.
The Company Secretary supplies all Directors
with information on relevant corporate
governance and best practice. As part
of their annual performance evaluation,
Directors are given the opportunity to
discuss training and development needs.
The Committee is confident that Board
members have the knowledge, ability
and experience to perform the functions
required of a director of a listed company.

External directorships
The Board believes, in principle, in the
benefit of Executive Directors accepting
non-executive directorships of other
companies in order to widen their skills
and knowledge for the benefit of the
Company. All such appointments require
the prior approval of the Board and the
number of public company appointments
is limited to one. There were no external
appointments in relation to the Executive
Directors during 2020.

Conflicts of interest
The Board operates a policy to identify
and, where appropriate, manage any
potential conflicts of interest that
Directors may have. It is the role of the
Committee to monitor and determine
actions to address any potential, or actual,
conflicts that may arise. The Committee
reviews all potential conflicts of interest
on an annual basis and when new Directors
are formally appointed. No conflicts of
interest were noted in the year and to the
date of this Annual Report.

Reappointment of Directors
The reappointment of Directors is
subject to their continuing commitment
to Board activities and satisfactory
performance. All Directors will stand
for re-election annually in accordance
with the provision of the 2018 Code.
The Committee has confirmed to the
Board that the contributions made by
the Directors offering themselves for
re-election at the 2021 AGM continue
to benefit the Board and the members
are invited to support their re-election.

Non-Executive Directors are appointed
initially for three years and Non-Executive
Directors may, subject to Board approval,
remain in office for a period of up to
six years, or two terms in office, with
discretion for the Board to extend the
term for one further three-year term,
to a maximum of nine years.

Annual evaluation
The performance of the Committee
has been assessed by way of an
internal process whereby the Chair
and Company Secretary carried out
a Committee evaluation through an
electronic questionnaire. The results of
this report were subsequently discussed
and areas identified to develop the
effectiveness of the Committee further.

Focus for 2021
Board membership and succession
will continue to be high on the agenda
moving into 2021. The Committee will
also monitor the effectiveness of recent
appointments to the Board and take an
active interest in the succession planning
and future leader identification processes
for those immediately below Board level,
sitting on the CLT, as well as monitoring
progress on diversity to ensure that
any succession plans incorporate an
appropriate balance of diversity,
skills and experience.

Chris Sullivan
Chair, Nomination Committee
22 March 2021

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“ The refreshed Audit and Risk Committee
has overseen a significant strengthening
of Alfa’s financial management and wider
governance capabilities.”

Steve Breach
Chair of the Audit and Risk Committee

Dear shareholders,
I am pleased to present our Audit and Risk
Committee Report for the year ended
31 December 2020. The Report explains
the work of the Committee during the
year, as well as setting out expected key
areas of focus for 2021.

The Committee has an annual work plan
linked to the Company’s financial reporting
cycle, which ensures that it considers all
matters delegated to it by the Board.
In addition, as announced on 22 July 2020,
following a competitive tender process,
RSM Audit UK LLP (‘RSM’) was appointed
to fill a casual vacancy to replace Deloitte
LLP (‘Deloitte’) which resigned as auditor
during the year. The Committee has
recommended to the Board that a
resolution be put to shareholders to
confirm the appointment of the new
auditor at the Annual General Meeting.

We have continued to review and
challenge the assumptions and
judgements made by management in
the preparation of published financial
information and to oversee the internal
control environment, including oversight
of the external and internal audit
processes. Throughout the year, the
Committee’s primary focus has been to
maintain the integrity and transparency
of the Company’s internal and external
financial reporting. We have spent
significant time assessing the application
of IFRS 15 ‘Revenue from Contracts
with Customers’, alongside careful
consideration of the Company’s risk
management framework, internal controls
and management information systems.

It has been pleasing to see that the
Company has made significant progress
during the year improving the timeliness
and accuracy of reporting and forecasts.
Importantly, these improvements have
been delivered during a period of remote
working which has existed since the date
of the last report.

Committee members’ skills and experience
are set out on pages 66 to 67. The Board is
satisfied that the Committee meets the
requirement to have recent and relevant
financial experience and that, as a whole,
its members have experience of the asset
finance and enterprise software sector
and corporate governance.

This year the Board undertook an
internally facilitated review of the
effectiveness of the Board and Board
Committees, including this Committee,
in accordance with the requirements under
the 2018 Code and you can read more
about this on page 77. As a result of its
work during the year, the Committee has
concluded that it has acted in accordance
with its Terms of Reference.

Steve Breach
Chair of the Audit
and Risk Committee

Principal activities in 2020
• Reviewed the 2019 year-end financial

statements and Annual Report.

• Reviewed the progress on the

financial management improvement
programme and agreed that it should
move into business as usual.

• Reviewed proposals from potential
audit firms and selected RSM to
replace Deloitte as the Company’s
external auditor.

• Worked with and monitored the

plan to transition to RSM.

• Reviewed the half-year financial
results and trading updates.
• Approved the Company’s risk
management framework, risk
appetite and risk register.

• Reviewed key findings from 2020
internal audits and approval of the
2021 internal audit plan.

• Considered key accounting matters
and new accounting standards.

Areas of focus for 2021
• Continue to monitor legislative and
regulatory changes that may impact
the work of the Committee.
• Consider the impact of proposed

audit industry changes.

• Consider a wider range of topics

for Committee training.

Attendance at Audit and
Risk Committee meetings

Steve Breach (Chair)

Adrian Chamberlain1

Charlotte de Metz1

Chris Sullivan

Meetings
attended

5/5

4/4

5/5

Adrian Chamberlain and Charlotte de Metz
were appointed on 24 April 2020 as members
of the Audit and Risk Committee.

The Committee’s members are all
Independent Non-Executive Directors.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202083

Meetings
During the year, the Committee met
five times and met privately with the
external auditor twice. The Committee
operates to a forward agenda linked
to the financial calendar which ensures
that the responsibilities and duties
of the Committee are discharged
in accordance with the Terms of
Reference and the requirements of
the UK Corporate Governance Code.

In addition to the Committee members,
by invitation, the meetings of the
Committee may be attended by the
CFO. The Chairman of the Board, CEO
and COO may also attend meetings.
The Company’s external auditor and
the internal audit services provider
are also present at all Committee
meetings, to ensure full communication
of matters as they relate to their respective
responsibilities. At the end of each
Committee meeting, Committee members
have the opportunity to meet with the
external auditor (and, where appropriate,
the internal auditor) for a private
discussion regarding the audit process
and relationship with management.

The Chair of the Committee holds
regular meetings with the external
auditor, which has an opportunity to
discuss matters with the Committee
without management being present and
also with the CFO (who has responsibility
and custody of the internal audit function).

Meetings of the Committee are
scheduled close to the end of the
half and full year, as well as before the
publication of the associated half-year
and full-year financial reports, so as
to ensure the Committee is informed
fully, on a timely basis, on areas of
significant risks and judgement.
The Board has confirmed that it is
satisfied that Committee members
possess an appropriate level of
independence and depth of financial
and commercial expertise. For the
year ended 31 December 2020, Steve
Breach, the Chair of the Committee,
was determined by the Board as having
recent and relevant financial experience.

The Committee is satisfied that it
receives sufficient information and
has access to relevant and timely
management personnel to allow the
Committee members to engage in an
informed debate during Committee
meetings and to fulfil its responsibilities.

Key responsibilities
of the Committee
The Board has delegated to the
Committee responsibility for overseeing
financial reporting, the review and
assessment of the effectiveness of the
internal control and risk management
systems and maintaining an appropriate
relationship with the external auditor.
The Committee has adopted Terms of
Reference, which are available to view at
investors.alfasystems.com. The Terms
of Reference provided the framework
for the Committee’s work in the year
and key responsibilities of the Committee
are summarised as follows:

• Overseeing the relationship with the

Company’s external auditor, monitoring
its effectiveness and independence
and making recommendations to the
Board in respect of its remuneration,
appointment and removal. The Committee
also reviews the findings from the external
auditor, including discussion of significant
accounting and audit judgements, levels of
errors identified and overall effectiveness
of the audit process.

• Reviewing the financial statements of
the Company, including its annual and
half-yearly reports and, if applicable,
any other formal announcements
relating to its financial performance.
The Committee will also consider
significant financial reporting issues,
accounting policies and key areas of
judgement or estimation. This review
also includes consideration of the
clarity and completeness of disclosures
on the information presented in the
financial statements.

• Overseeing the accounting principles,
policies and practices adopted by
the Company.

• Monitoring and reviewing internal

audit activities, reports and findings.

• Reviewing the effectiveness of the

Company’s system of internal financial
controls and internal control systems.
• Advising the Board on the Company’s
risk strategy, risk policies and current
and emerging risk exposures, including
the oversight of the overall risk
management framework and systems.
• Assessing the adequacy and security
of the Company’s arrangements for
its employees and contractors to raise
concerns, in confidence, about possible
wrongdoing in financial reporting
or other matters and to ensure
proportionate and independent
investigation of such matters.
• Making recommendations to the
Board as it deems appropriate
on any area within its remit where
action or improvement is required.

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Significant financial
reporting judgements
As part of its monitoring of the
integrity of the financial statements,
the Committee reviews whether suitable
accounting policies have been adopted
and whether management has made
appropriate estimates and judgements
and seeks support from the external
auditor to assess them. The Committee

considered the following significant
judgements and other areas of audit
focus in respect of the financial statements
for the year ended 31 December 2020.
These areas have been identified as being
significant by virtue of their materiality or
being accounting items which are new for
the current financial year or the level of
judgement and/or estimation involved.
In order to ensure the approaches taken

were appropriate, the Committee
considered reports from both
management and the external auditor.
The Committee challenged judgements
and sought clarification where necessary.
The Committee received a report from
the external auditor on the work it had
performed to arrive at its conclusions
and discussed in detail all material
findings contained within the report.

Assessment

Review of the Committee

Area of
focus

Revenue
recognition

Development
costs

Alternative
performance
measures
(‘APMs’) and
presentations
not specifically
defined by
IFRS

The Group’s operations include complex
software implementation programmes and
service activities.

The delivery of these contracts typically extends
over more than one reporting period, and
often the original project plans are amended
as the implementation programme progresses.
In addition, from time to time, the Company
is entitled to one-off licence income uplifts or
changes to maintenance income entitlements.

In recognising revenue, management must
apply a number of judgements to allocate the
overall transaction price across the multiple
performance obligations that have been
identified within these projects.

The Group continues to invest in the
development of the Alfa Systems product.
The majority of development effort is
undertaken in partnership with
customers and therefore is specific to that
implementation or customer’s process.

Judgement is required to assess whether
any development is substantially new in either
design or functionality, and whether it would
be commercially viable in the open market.
Therefore, management assesses the likelihood
of capitalisation of such costs prior to initiation
of the investment project and also performs
bi-annual assessments of the development work
that has been undertaken to determine if it meets
the criteria set out in IAS 38 for capitalisation.

Alfa has used APMs which are not specifically
defined by IFRS, being Adjusted EBIT and
Adjusted EBIT margin, to show the impact on
earnings before the capitalisation (and related
amortisation) of development costs, in order to
present clearly the underlying costs and results
of the Group.

Additionally, Alfa has used Constant currency
revenue growth to show the underlying growth
of revenues excluding the effects of currency
fluctuations, and Operating free cash flow
conversion to show the conversion of
Adjusted EBIT to cash.

Going concern
and viability
statement

The Directors must satisfy themselves
regarding the Group’s long-term viability
and confirm that they have a reasonable
expectation that the Group will continue
to operate and meet its liabilities as they
fall due for the foreseeable future.

In advance of the half year and full year the Committee received reports from
management that outlined the key judgements that were likely to be required to
be included in the results. These reports were reviewed and the key points within
them were discussed, with the external auditor commenting where relevant.

As part of the process of approving the issuing of the half-year and full-year results
these reports were updated and issued by management to the Committee with
management’s final positions documented. These were considered carefully
by the Committee in conjunction with input from the external auditor.

The Company entered into a five-year extension for an existing client in
October 2020. This was a large contract with the key judgements being how
much of the contract value should be split between licence and maintenance
revenues, and how this should be recognised over the five years. There were
initial discussions in the December 2020 meeting, and the Company produced
a detailed paper outlining the approach taken and the judgements made for
the March 2021 meeting, which were reviewed carefully by the Committee
with input from the auditor, and the position adopted in the accounts agreed.

The Committee reviewed reports from management detailing the costs that
had been identified as appropriate for capitalisation.

The Committee reviewed the use of these APMs and agreed with management
that over time the usefulness of the Adjusted EBIT and Adjusted EBIT margin
had declined and so the use of these measures should be discontinued.

The Committee also reviewed the calculation of the Operating free cash flow
conversion and amended this to reflect the discontinuation of Adjusted EBIT
as an APM. In addition, the Committee noted that total lease payments were
previously included in Operating free cash flow; in order to make the cash flow
measure consistent with the profit measure Alfa changed Operating free cash
flow to only include the principal element of lease payments.

The Committee reviewed management’s budget and forecasts, including
an overview of the assumptions made in the preparation of the base case
supporting the going concern and viability statement. This included the
Group’s 2021 budget and also plans for 2022 and 2023.

The Committee discussed and challenged the budget and forecasts before
agreeing with the reasonableness of the three-year period. The Committee
assessed this in light of the principal risks and uncertainties, including the
impact of Covid-19, as disclosed on pages 44 to 49 in the Strategic report.

The Committee discussed and challenged the downside scenarios modelled
as part of the viability statement as disclosed on pages 50 to 51 in the Strategic
report, the funding headroom available, the feasibility of mitigating actions
and the speed of implementation of any cost-saving measures following future
management decision-making.

The Committee noted the 2018 Code requirement for the Directors to
state whether they consider it appropriate to adopt the going concern basis
of accounting for a period of at least 12 months from the date of approval
of the 2020 financial statements.

Conclusion/Action taken

The Committee agreed with the revenue

judgements adopted by management in

preparing the results.

The Committee noted that the amounts

being capitalised remained relatively modest

compared with the total expenditure on the

product during the period. The Committee

concurred with management’s approach on

the amounts to be capitalised.

The Committee agreed with management

that the continued use of Constant currency

revenue growth and Operating free cash flow

conversion % was appropriate.

Following this evaluation and analysis, the

Committee was satisfied with the judgements

made and that the continued use of the going

concern basis was appropriate, and the viability

statement was prepared appropriately.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Area of

focus

Assessment

Review of the Committee

Revenue

recognition

The Group’s operations include complex

software implementation programmes and

service activities.

The delivery of these contracts typically extends

In advance of the half year and full year the Committee received reports from

management that outlined the key judgements that were likely to be required to

be included in the results. These reports were reviewed and the key points within

them were discussed, with the external auditor commenting where relevant.

over more than one reporting period, and

As part of the process of approving the issuing of the half-year and full-year results

often the original project plans are amended

these reports were updated and issued by management to the Committee with

as the implementation programme progresses.

management’s final positions documented. These were considered carefully

In addition, from time to time, the Company

by the Committee in conjunction with input from the external auditor.

is entitled to one-off licence income uplifts or

changes to maintenance income entitlements.

The Company entered into a five-year extension for an existing client in

October 2020. This was a large contract with the key judgements being how

In recognising revenue, management must

much of the contract value should be split between licence and maintenance

apply a number of judgements to allocate the

revenues, and how this should be recognised over the five years. There were

overall transaction price across the multiple

initial discussions in the December 2020 meeting, and the Company produced

performance obligations that have been

identified within these projects.

a detailed paper outlining the approach taken and the judgements made for

the March 2021 meeting, which were reviewed carefully by the Committee

with input from the auditor, and the position adopted in the accounts agreed.

Development

The Group continues to invest in the

The Committee reviewed reports from management detailing the costs that

costs

development of the Alfa Systems product.

had been identified as appropriate for capitalisation.

The majority of development effort is

undertaken in partnership with

customers and therefore is specific to that

implementation or customer’s process.

Judgement is required to assess whether

any development is substantially new in either

design or functionality, and whether it would

be commercially viable in the open market.

Therefore, management assesses the likelihood

of capitalisation of such costs prior to initiation

of the investment project and also performs

bi-annual assessments of the development work

that has been undertaken to determine if it meets

the criteria set out in IAS 38 for capitalisation.

Alternative

performance

measures

(‘APMs’) and

presentations

not specifically

defined by

IFRS

Alfa has used APMs which are not specifically

The Committee reviewed the use of these APMs and agreed with management

defined by IFRS, being Adjusted EBIT and

that over time the usefulness of the Adjusted EBIT and Adjusted EBIT margin

Adjusted EBIT margin, to show the impact on

had declined and so the use of these measures should be discontinued.

earnings before the capitalisation (and related

amortisation) of development costs, in order to

present clearly the underlying costs and results

of the Group.

The Committee also reviewed the calculation of the Operating free cash flow

conversion and amended this to reflect the discontinuation of Adjusted EBIT

as an APM. In addition, the Committee noted that total lease payments were

previously included in Operating free cash flow; in order to make the cash flow

Additionally, Alfa has used Constant currency

measure consistent with the profit measure Alfa changed Operating free cash

revenue growth to show the underlying growth

flow to only include the principal element of lease payments.

of revenues excluding the effects of currency

fluctuations, and Operating free cash flow

conversion to show the conversion of

Adjusted EBIT to cash.

Going concern

The Directors must satisfy themselves

and viability

statement

regarding the Group’s long-term viability

and confirm that they have a reasonable

expectation that the Group will continue

to operate and meet its liabilities as they

fall due for the foreseeable future.

The Committee reviewed management’s budget and forecasts, including

an overview of the assumptions made in the preparation of the base case

supporting the going concern and viability statement. This included the

Group’s 2021 budget and also plans for 2022 and 2023.

The Committee discussed and challenged the budget and forecasts before

agreeing with the reasonableness of the three-year period. The Committee

assessed this in light of the principal risks and uncertainties, including the

impact of Covid-19, as disclosed on pages 44 to 49 in the Strategic report.

The Committee discussed and challenged the downside scenarios modelled

as part of the viability statement as disclosed on pages 50 to 51 in the Strategic

report, the funding headroom available, the feasibility of mitigating actions

and the speed of implementation of any cost-saving measures following future

management decision-making.

The Committee noted the 2018 Code requirement for the Directors to

state whether they consider it appropriate to adopt the going concern basis

of accounting for a period of at least 12 months from the date of approval

of the 2020 financial statements.

Fair, balanced and
understandable
The Committee has undertaken a careful
review to ensure that the Annual Report
is ‘fair, balanced and understandable’
and provides the necessary information
for shareholders to assess the Company’s
consolidated position, performance,
business model and strategy, in line
with the requirements of the 2018 Code.
The Committee members were consulted
at various stages during the drafting
process and provided input at the planning
stage, as well as having the opportunity
to review the Annual Report as a whole
and discuss, prior to the March 2021
Committee meeting, any areas requiring
additional clarity or better balance in the
messaging. In forming its opinion and
recommendation to the Board in respect
of the above matters, the Committee
assessed the following:

• A qualitative review of disclosures

and a review of internal consistency
throughout the Annual Report
and Accounts;

• A review by the Committee of all

material matters, as reported elsewhere
in this Annual Report and Accounts;

• A risk-comparison review, which
assesses the consistency of the
presentation of risks, and significant
judgements throughout the main areas
of risk disclosure in this Annual Report
and Accounts;

• A review of the balance of good

and bad news; and

• Ensuring it correctly reflects:
• the Company’s position and
performance as described on
pages 120 to 153;

• the Company’s business model,

as described on pages 18 to 19; and
• the Company’s strategy, as described

on pages 1 to 63.

On the basis of this work, together
with the views expressed by the external
auditor, the Committee recommended,
and in turn the Board confirmed, that
it could make the required statement
that the Annual Report is ‘fair, balanced
and understandable’.

Risk management
The Board has overall responsibility for
determining the nature and extent of its
principal and emerging risks and the extent
of Alfa’s risk appetite, and for monitoring
and reviewing the effectiveness of the
Company’s systems of risk management
and internal control. Further details of the
risk management objectives and process
are on pages 42 to 43. The principal risks
and uncertainties facing the Company are
addressed in the Strategic report in the

table on pages 44 to 49. The Board
has delegated to the Committee the
responsibility for monitoring the effectiveness
of the systems of risk management.

Internal control
The Board determines the objectives and
broad policies of the Company and meets
regularly, when a set schedule of matters
which are required to be brought to it for
decision is discussed. Overall management
of the Company’s risk appetite, its
tolerance to risk and discussion of key
aspects of execution of the Company’s
strategy remain the responsibility of
the Board. The Board has delegated
to the Audit and Risk Committee the
responsibility for overseeing the system
of internal controls to ensure these are
appropriate to the business environments
in which the Company operates.

Key elements of this system include
the following:

• A clearly defined organisation structure

for monitoring the conduct and
operations of the business.

• Clear delegation of authority throughout
the Company, starting with the matters
reserved for the Board.

• A formal process for ensuring that key
risks affecting operations across the
Company are identified and assessed
on a regular basis, together with the
controls in place to mitigate those
risks. Risk consideration is embedded
in decision-making processes at all
levels and the most significant risks
are periodically reviewed by the
Board. The risk process is reviewed
by the Audit and Risk Committee.
• The preparation and review of the

annual budget.

• The monthly reporting of actual

results and their review against the
budget, forecasts and the previous
year, with explanations obtained for
all significant variances.

• The Finance Manual which outlines key
control procedures and policies to apply
throughout the Company. This includes
clearly defined policies and escalating
authorisation levels for all procurement
activity including capital expenditure
and investment.

In the 2019 Annual Report and Accounts
the Committee highlighted that whilst
the majority of Alfa’s controls operated
as intended there were some areas of
weakness. The areas highlighted were
the timeliness of reporting and the
implementation of IFRS 15, along with the
inherent difficulty of accurate forecasting
which is particularly dependent on the
timing of new contract sign-offs and
project milestones, changes to which
may be beyond the control of Alfa.

Conclusion/Action taken

The Committee agreed with the revenue
judgements adopted by management in
preparing the results.

The Committee noted that the amounts
being capitalised remained relatively modest
compared with the total expenditure on the
product during the period. The Committee
concurred with management’s approach on
the amounts to be capitalised.

The Committee agreed with management
that the continued use of Constant currency
revenue growth and Operating free cash flow
conversion % was appropriate.

Following this evaluation and analysis, the
Committee was satisfied with the judgements
made and that the continued use of the going
concern basis was appropriate, and the viability
statement was prepared appropriately.

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R E P O R T O F T H E A U D I T A N D R I S K C O M M I T T E E C O N T I N U E D

Throughout 2020 progress has been made
on all the areas that were highlighted with
the timeliness of reporting, including the
impact of IFRS 15, significantly improving
through the year and embedded into a
new monthly management report, along
with more detailed and robust forecasting
and budget processes. There are some
additional improvements being targeted
for 2021, but these areas are not now
considered ongoing areas of weakness,
and no new areas of weakness were
identified during 2020.

Internal audit
The Audit and Risk Committee
supports the Board in fulfilling its
responsibilities to review the activities,
resources, organisational structure and
operational effectiveness of the internal
audit activities. Following discussion with
the Committee Chair and the CFO, BDO
LLP presents its internal audit plan for
approval to the Committee before the
start of each new financial year and will
provide an update and further plans at
the mid-year stage.

The Committee monitored and reviewed
the scope, extent and effectiveness
of the internal audit plan in line with
the Company’s key risks and strategy.
Internal audit is a standing agenda item
at each Committee meeting and BDO LLP
presents an update on audit activities,
the progress of the audit plans and the
outcomes of all audits with action plans
to address any issues. Activities of internal
audit during 2020 included the following
areas of focus:

• Risk management processes
• Contract management and

commercial contracts

• Business continuity planning
and IT disaster recovery

• Financial systems and controls
• Recruitment and retention; and
• Brexit preparations.

As part of the annual review referenced
above, and considering management’s
opinion, the Committee was satisfied
that the internal audit function remains
effective and fit for purpose.

External Audit
The Committee oversees the Company’s
relationship with, and the performance of, the
external auditor. This includes responsibility
for monitoring its independence, objectivity
and compliance with ethical and regulatory
requirements. The Committee is the
primary contact with the external auditor.
The Committee also has responsibility for
approving the nature of non-audit services
which the external auditor may or may not
be allowed to provide to the Company
and the fees paid for these services
(subject to de minimis levels).

External audit tender
and appointment
As announced on 22 July 2020, following
a comprehensive tender process, the
Audit and Risk Committee recommended,
and the Board agreed to recommend
to shareholders, that RSM be appointed
to succeed Deloitte as the Company’s
auditor. A resolution to appoint RSM for
the year ending 31 December 2021 is
being proposed to shareholders at the
Company’s AGM to be held on Monday
10 May 2021. You can read more about
this in the Notice of AGM, which will be
available on the website in due course.
The Company has complied with the
provision of the Competition and Markets
Authority’s order for year-end 2020
in respect of audit tendering and the
provision of non-audit services.

When considering the future strategy of
the Company, the Committee considered
partnering to be a key component of
future growth plans. To ensure that the
Company can work with the widest range
of partners possible, Deloitte, which is
one of the leading service providers to
the global asset and automotive finance
market, was not considered as part of
the tender process for the audit.

Independence and performance
of the external auditor
The Committee is responsible for
reviewing the independence of the
Company’s external auditor, RSM,
agreeing the terms of engagement and
the scope of its audit. RSM has a policy
of partner rotation, which complies with
regulatory standards, and RSM operates
a peer review process for its engagements,
to ensure that its independence is
maintained. The Committee reviewed a
report from the external auditor describing
its arrangements to identify, report and
manage any conflicts of interest.

Maintaining an independent relationship
with the Company’s external auditor is a
critical part of assessing the effectiveness
of the audit process. The Board has
approved a policy which is intended to
maintain the independence and objectivity
of the external auditor. The policy governs
the provision of audit, audit-related
services and non-audit services provided
by the auditor. Committee approval is
required for any service with an expected
cost in excess of £10,000. During 2020,
the external auditor confirmed to the
Committee that it did not provide any
non-audit or additional services other than
for the half-year review that could lead
to its objectivity and independence being
compromised on behalf of the Company.
Details of audit, audit-related fees and
non-audit fees are included in note 9
to the consolidated financial statements.

The Committee notes that audit partner
rotation every five years facilitates
independence and objectivity within the
external audit team. The current External
Audit Engagement Partner is Graham
Ricketts, who was appointed to lead
the audit in July 2020. The Committee
is satisfied with the performance and
effectiveness of RSM as external auditor,
taking into account the Committee’s own
assessment and feedback. The Committee
has concluded that RSM displays the
necessary attributes of independence
and objectivity.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202087

Assessment of the audit process
The scope of the external audit is formally
documented by the auditor. It discusses
the draft plan with management before it
is referred to the Committee, which reviews
its suitability and holds further discussions
with management and the auditor before
final approval. The Committee has reviewed
the quality of the audit plan and related
reports for the 2020 audit and is satisfied
with the quality of these documents.

Assessment of the effectiveness
of the Committee
The Committee’s effectiveness in respect
of 2020 was evaluated as part of the
internal review described on page 77.
The key issues that were identified in
the Committee evaluation were discussed
by the Committee to ensure these were
adequately addressed and the Chair
provided an update where appropriate.

Focus for 2021
In 2021, as well as the regular cycle of
matters that the Committee schedules
for consideration each year, the
Committee will continue to monitor
legislation and regulatory changes,
including those that affect the audit
market that may impact the work of
the Committee.

Steve Breach
Chair, Audit and Risk Committee
22 March 2021

The Committee discussed the quality
of the half-year review and audit work
since RSM’s appointment and considered
the performance of the external auditor,
taking into account feedback from various
stakeholders across the business and
the Committee’s own assessment.
The evaluation focused on: robustness
of the audit process; quality of delivery;
reporting; and people and services.
The Committee reviewed the independence
of the external auditor and concluded
that it complies with UK regulatory and
professional requirements and that its
objectivity is not compromised.

The Committee does not intend to put
the external audit out to tender in the
coming financial year as the appointment
of RSM occurred in 2020 and therefore
the Company has complied with the
Competitions and Markets Authority
requirement in relation to audit tenders
every 10 years. The Committee will
continue to keep this under review
as part of its review of effectiveness
of the external auditor.

Going concern and
viability statements
The Committee reviewed the updated
wording of the Company’s longer-term
viability statement, set out on pages 50
to 51. To do this, the Committee ensured
that the financial model used was consistent
with the approved three-year plan and
that scenario and sensitivity testing
aligned clearly with the principal risks of the
Company. Committee members challenged
the underlying assumptions used and
reviewed the results of the detailed work
performed. The Committee was satisfied
that the analysis supporting the viability
statement had been prepared on an
appropriate basis. The Committee also
reviewed the going concern statement,
set out on page 41 and confirmed its
satisfaction with the testing methodology.

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D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T 2 0 2 0

“ The Committee has had an active year,
ensuring that remuneration decisions
taken during the year appropriately
reflected the impact on all stakeholders
during the Covid-19 pandemic.”

Adrian Chamberlain
Chair of the Remuneration Committee

Dear shareholders,
I am pleased to present our Directors’
Remuneration Report for the year ended
31 December 2020, including both a new
Directors’ Remuneration Policy and the
Annual Report on Remuneration for
approval at the 2021 AGM. This is my
first report since I took over as Chair
of the Committee in April 2020 and
I would like to thank Chris Sullivan for
his work on the Committee as Chair,
and to Steve Breach and Charlotte
de Metz for their contribution to the
Committee’s work during 2020.

Obviously, 2020 has been an unusual
year due to the Covid-19 pandemic. The
Committee has had to consider carefully
the impact that this should have on setting
short-term and long-term targets, as well
as its decision-making on remuneration
outcomes for the year. The 2020 bonus
targets were set in advance of the
pandemic and these remained unchanged.
The 2020 LTIP targets were set after the
pandemic had hit and a couple of months
into lockdown at a point at which the share
price had increased by more than 40%
from its low point and back to the level
of September 2019. This informed the
Committee’s decision not to scale back
award opportunities for 2020, nor adjust
the basis of the TSR targets attaching to

50% of the awards. Similarly the EPS
targets were set by looking at growth
rates based off the 2019 results which
were unaffected by the pandemic. Having
considered the incentives carefully we
believed then and continue to believe
now that the remuneration structure is
fit for purpose even given the evolving
circumstances. Like many Remuneration
Committees we relied on internal and
external guidance in light of the effects
the pandemic had in every area of our
lives. As is our duty to all Alfa stakeholders,
we want to ensure that the overall
remuneration structure remains fit for
purpose in light of evolving circumstances,
but also aligned with the interests of
other key stakeholder groups, notably
our employees.

The Committee engaged with shareholders
as part of our review of our proposed
Directors’ Remuneration Policy as well as
assessing its effectiveness with the input
of our external remuneration advisor.
The Committee also spent time ensuring
that our approach to remuneration
continues to remain in line with market
changes and corporate governance
developments. The Committee continued
to carry out its usual role in ensuring
remuneration outcomes and decisions are
appropriate in the wider business context.

Company performance in 2020
The Company saw a strong financial
and operational performance in 2020.
In spite of the economic uncertainties
brought about by the pandemic, revenues
were up 22% on prior year at £78.9m
(2019: £64.5m) and operating profit
increased by £10.2m to £23.9m
(2019: £13.7m). For a comprehensive
overview, I would direct readers to the
Strategic report on pages 1 to 63.

During the pandemic, the Company
did not furlough any employees or
access any Government support.
We also redirected time and resources
to develop a programme of wellbeing
resources, activities and events to support
our employees through a difficult period.

In September 2020, we were delighted
to announce the declaration of a special
dividend, our first as a listed Company.
This returned £44.2m to shareholders
and was positively received.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Performance outturns for 2020
Reflecting the strong financial and
operational performance, and taking
into account the broader stakeholder
experience in 2020. The Committee
approved the 2020 bonus outcomes
for the Executive Directors. Operating
profit and revenue performance both
significantly exceeded the performance
ranges set, warranting 100% payout under
each element respectively. The Committee
similarly reviewed the outcome in respect
of the free cash flow element, and
considered that, although the Company
had maintained a good operating free
cash flow of 114%, the stretching threshold
was not achieved and no payment would
be made in respect of this element.

The Committee also assessed the
performance of each of the Executive
Directors against their personal objectives,
and concluded that payouts of between
target and maximum were warranted for
each of the CFO and COO.

This led to an overall outcome of 82%
of maximum (pro-rated for time served)
for the CFO and 80% of maximum for
the COO. More information on how the
annual bonus for 2020 was determined
is provided on page 101.

The Executive Chairman and the CEO
have separately advised the Committee
that, due to their significant shareholding
in the Company, they wish to waive
their eligibility for a bonus in respect of
the performance year 2020 and for any
Long-Term Incentive Plan (LTIP) award for
the performance period beginning January
2021. Shareholders will be aware that the
Executive Chairman and CEO also waived
any entitlement for the performance years
2017, 2018 and 2019. The Committee
places on record its thanks to the Executive
Chairman and the CEO for waiving their
bonus and LTIP entitlements, which helps
the Committee broaden share ownership
to selected Company employees.

More broadly, the Committee is satisfied
with Alfa’s response to the Covid-19
pandemic and the impact this had on the
experience of all key Alfa stakeholders
during the year – including shareholders,
employees and customers. The Committee
has therefore not exercised any discretion in
relation to the outcome of the variable pay
schemes, or to overall remuneration levels.

The first LTIP awards for Executive
Directors and members of the Company
Leadership Team were awarded in June
2020 and the performance against the
targets for both relative total shareholder
return (‘TSR’) and earnings per share
(‘EPS’) growth over the three years to
December 2022 will be reviewed regularly.

2021 Policy and implementation
As required by the reporting regulations
with which Alfa must adhere, the
Remuneration Policy is being submitted
to a binding vote at the 2021 AGM, this
being the third anniversary of its adoption.
In the year, the Committee debated
the existing remuneration arrangements
but on balance we decided that the
current approach remained well suited to
our strategic intentions. The Policy being
put to shareholders at the 2021 AGM
therefore remains largely unchanged.

The Committee has also worked to
incorporate updates to the UK Corporate
Governance Code into our new Policy.
This has involved the development of a
new post-cessation shareholding policy,
and reinforcement of existing processes
to ensure the Committee reflects on wider
workforce conditions when setting pay.
From 2021, Executive Directors will
have to retain their full 200% of salary
shareholding requirement for one year
after leaving the Group, and 100%
of salary (50% of the requirement) for
a second year. This is to ensure Executive
Directors are aligned with the shareholder
experience beyond directorship, encouraging
risk-conscious stewardship.

Finally, the Committee reviewed the
claw back policy to ensure it allows
value to be recouped form not only
the Executive Directors but also all
participants of our LTIPs in a sufficiently
wide range of circumstances. We concluded
that the malus and clawback triggers
currently in place provide us with sufficient
flexibility to recover payments should
such circumstances arise, though we will
keep this under review as practice evolves.

Further details on our new Remuneration
Policy are described on pages 92 to 98.

Principal activities in 2020
• Approved the remuneration
for Duncan Magrath, prior to
his appointment to the Board;
• Engaged with stakeholders on the

2021 Directors’ Remuneration Policy;

• Approved a revised remuneration
structure for senior management
below Board level;

• Set the annual bonus targets for

the Executive Directors for the financial
year 2020 and measured performance
against them (following the year end);
• Approved LTIP awards to employees

under the LTIP, and the targets
attached to these;

• Incorporated the revised UK
Corporate Governance Code
into the Committee’s policies
and procedures; and

• Reviewed and recommended
for approval the revised Terms
of Reference of the Committee.

Areas of focus for 2021
• Approval of bonus performance
measures and targets for 2021;

• Approval of performance

conditions and awards under
the Company’s LTIP for 2021;

• Review of any issues raised
by shareholders in relation
to remuneration and the
Remuneration Policy; and
• Assessment of the ongoing

appropriateness of the remuneration
arrangements in light of remuneration
trends and market best practice.

Attendance at Remuneration
Committee meetings

Adrian Chamberlain (Chair)1

Chris Sullivan2

Steve Breach

Charlotte de Metz

Meetings
attended

2/2

3/3

2/2

Adrian was appointed as Chair of the
Remuneration Committee on 24 April 2020.

Chris resigned as Chair of the Remuneration
Committee on 24 April 2020.

The Committee’s members are all
Independent Non-Executive Directors.

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D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T 2 0 2 0 C O N T I N U E D

For the upcoming year, salaries will
remain unchanged for the Chairman,
CEO, CFO and COO, though they will
be reviewed annually to assess their
continued suitability.

The opportunities available under the
annual bonus will remain at 100% of salary
for the CEO and COO and 125% for the
CFO. As the business moves towards
targeting more subscription revenues, the
Committee have taken the opportunity
to review the performance measures
for the 2021 annual bonus. We are of the
view that our existing measures of revenue,
operating profit and personal objectives
continue to be appropriate for 2021.
We have reviewed the cash measure and
consider this should be a modifier rather
than an absolute incentive in its own right,
as the Committee believes this will better
match the strategy of the business. It will
incentivise management to continue to
maintain a strong cash focus, but without
dis-incentivising them for pursuing more
recurring revenues. Further information
is provided on pages 106 and 107.

We understand from our engagement
with shareholders that quantifiable non-
financial objectives are of real importance
and, as such, the Committee will continue
to strive to meet these expectations. As in
previous years, precise financial and non-
financial targets are commercially sensitive
and will be disclosed at the end of the
performance year, per our current practice.

The opportunities available under the LTIP
have been set at 150% for the CFO and
100% of salary for the COO. Over the
year the Committee gave careful thought
to the measures in the LTIP. We believe
that, for now, EPS and TSR continue to
provide the most appropriate means of
testing long-term performance and
therefore no changes have been made
for the 2021 awards, though we will
continue to review the suitability of the
measures prior to making new awards,
as we do currently.

UK Corporate Governance Code
To ensure the Committee continues to
be mindful of wider workforce conditions,
we have worked to improve the flow of
feedback and workforce information
which is provided to the Committee
and the Board on a regular basis.

Committee evaluation
The Committee’s performance was
evaluated internally by the Company
Secretary. Further information on the
process is summarised on page 77.
The evaluation concluded that the
Committee was operating effectively.
All Committee members were found to
robustly challenge data, proposals, and
remuneration and variable incentives.
It was agreed that, given the evolving
regulatory framework, there would be
additional focus on training for the
Committee in 2021.

2020 AGM
We were naturally disappointed that
we were unable to allow shareholders to
attend our 2020 AGM on 11 June 2020.
Our primary concern during this time was
the health and safety of our employees
and all stakeholders under the guidance
of the UK government.

We had hoped to welcome shareholders
in person to the 2021 AGM. Due to
continuing restrictions on public gatherings
and travel, we look forward to welcoming
shareholders virtually through an online
meeting platform.

I hope you will support both the binding
vote on the Directors’ Remuneration Policy,
where we have taken into consideration
your feedback, and the advisory vote on
the Directors’ Remuneration Report at
our upcoming AGM, and that you find
this report accessible and informative
in aiding that decision.

Adrian Chamberlain
Chair of the Remuneration
Committee

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020E X E C U T I V E R E M U N E R AT I O N P O L I C Y O V E R V I E W

Directors’ Remuneration Policy and implementation for 2021

Policy change

Salary &
benefits

CEO £337,175

CFO £284,947

COO £229,863

CEO Waived

Pension

CFO 6%

COO 6%

CEO 100%

Annual bonus
(Policy max 150%)

CFO 125%

50% deferred for
three years

COO 100%

CEO

2021 grant 100%

LTIP
(Policy max 150%)

CFO

2021 grant 150%

COO

2021 grant 100%

CEO

Safeguards

CFO

COO

CEO

CFO

COO

Shareholding
requirements
200% of salary

Post
employment Y1

Post
employment Y2

Post-
employment
shareholding

CEO 200%

100%

CFO 200%

100%

COO 200%

100%

Maximum
contribution reduced
from 10% to align
with workforce rate

Increase deferred
element from 25%
to 50% in line with
DBSP operation

2-year holding
period

Unchanged

Under the new
Policy, a two-year
post-employment
shareholding
requirement
will apply

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A L FA F I N A N C I A L S O F T WA R E H O L D I N G S P L C
2 0 2 1 D I R E C T O R S ’ R E M U N E R AT I O N P O L I C Y

Shareholders approved the
Remuneration Policy at the AGM in
2018. As such, the Company is required
to seek approval for the new Policy at the
AGM to be held on 10 May 2021, from
which date the updated Policy (subject
to being approved) will apply for a period
of up to three years. The Committee

reviewed the remuneration framework
during the year to ensure that it remains
fit for purpose and is designed to
support and drive the business strategy.

The Policy is designed to attract, retain
and motivate our leadership within a
framework designed to promote the

long-term success of Alfa and align with
our shareholders‘ interests. The Policy
remains largely unchanged from the
Remuneration Policy approved by
shareholders in 2018.

Fixed elements of remuneration for Executive Directors

Element of
remuneration

Purpose and
link to strategy Operation

Salary

To attract, retain and
motivate Executive
Directors of the
calibre required to
deliver the Company’s
strategy and drive
business performance.

Base salaries will be reviewed at least
annually, and assessed, taking into
account the scope and requirements of
the role, experience of the incumbent
and the total remuneration package.
Any increases will typically be effective
from 1 January.

Account will also be taken of the
performance of the business, the
salary increases awarded to the wider
employee population, and remuneration
arrangements in other listed companies
of comparable scale and sector.

Maximum
opportunity

There is no overall maximum
for, or increase to, salary levels.
In awarding any increase, the
Committee will be mindful of
the general increase for the
broader employee population.

In appropriate circumstances
the Committee may award
increases outside this range.

Performance

Personal performance
will be taken into
consideration when
determining any salary
increases.

These may include:
• A change in role and/or

responsibilities;
• Performance and/or

development in the role
of the Executive Director;

• A significant change in
the Company’s size,
composition and/or
complexity.

In addition, where an Executive
Director has been appointed to
the Board at a starting salary
which is lower than typical
market rate, larger increases
may be awarded as their
experience develops, if the
Committee considers such
increases to be appropriate.

Given that the cost of
benefits depends on
the Executive Director’s
individual circumstances,
there is no prescribed
maximum monetary value.

The cost of the benefits
provision will be reviewed
by the Committee on a
periodic basis to ensure
it remains appropriate.
Other payments such as
legal fees or outplacement
costs may be paid if it is
considered appropriate.

There are no
performance
conditions.

The maximum Company
contribution for Executive
Directors will not exceed the
contribution (as a percentage
of salary) available to the
broader employee population.
The current contribution level
for Executive Directors is 6%
of salary, which is aligned to the
contribution for the broader
employee population.

Benefits

To provide market-
competitive benefits
which drive Executive
Directors to deliver the
Company’s strategy.

Pension

To encourage and
assist with responsible,
secure retirement
provisions, thereby
facilitating the
recruitment of
high-calibre Executive
Directors to deliver the
Company’s strategy.

The Committee’s policy is to provide
Executive Directors with competitive
levels of benefits, taking into
consideration the benefits provided
to Alfa’s employees and those offered
by its peers. Benefits are in line with
those for the broader workforce and
currently include (but are not limited
to) a car or cash allowance; private
medical insurance (individual and
family, if applicable); and death in
service life assurance. The Company
may award additional benefits where
the Committee considers it appropriate
(e.g. travel, accommodation and
subsistence allowances). These may
include national and international
relocation benefits such as (but not
limited to) accommodation, family
relocation support and travel in line
with our policy for other employees
in similar situations.

May be provided by way of contribution
into a Company pension scheme or
receive a cash supplement in lieu of
pension contributions into this scheme
(or such other arrangement the
Committee determines has the
same economic effect).

Alfa Financial Software Holdings PLC Annual Report and Accounts 202093

Performance

Performance
measures will
comprise a
combination of
financial and
non-financial
objectives and the
measures may vary
from year to year.
At least half of the
annual bonus will be
based on financial
measures. The
non-financial
performance
measures may include
a combination of
strategic and/or
personal objectives.

Further details on,
and the rationale for,
the measures used
in the annual bonus
will be disclosed in
the relevant Annual
Report (and the
targets set will
normally be disclosed
retrospectively,
subject to these
being considered
not to be
commercially
sensitive).

Performance
measures will be
determined by the
Committee at the
time of making each
award to ensure
alignment with the
long-term success
of the business.
The performance
conditions may
include, but are not
limited to, market
measures, financial
measures, and
strategic long-term
objectives.

For performance
between threshold
and maximum,
awards vest on a
straight-line basis.

Maximum
opportunity

The maximum bonus
opportunity may be
up to 150% of salary
for the Executive
Directors for each
financial year.

Annual awards
made each year to
Executive Directors
will be set out in
the Annual Report
on Remuneration
in respect of the
relevant year.

Variable Elements of remuneration for Executive Directors

Element of
remuneration

Purpose and
link to strategy Operation

Annual bonus and
Deferred Bonus
Share Plan (DBSP)

Incentivises
and rewards the
achievement of
annual financial
and non-financial
objectives integral
to the Company’s
strategy.

The part-deferral
of earned bonus
into shares provides
alignment with
shareholders’
long-term interests.

The Committee will set the performance
measures and their weighting, and targets
annually to reflect the key financial, strategic
and personal priorities for the business in the
relevant year.

Annual bonus outcomes will be determined by
the Committee, and the Committee may use its
discretion at the end of the performance period
to adjust the final bonus outcome if it considers
that the outcome does not reflect the underlying
performance of the business during the year, or
if it considers the payment is not appropriate in
the context of unforeseen, unexpected or
exceptional circumstances.

Where exercised, the rationale for this discretion
will be fully disclosed to shareholders in the
relevant Annual Report.

Not less than 50% of any bonus will normally be
deferred into an award of shares under the DBSP.
Deferred shares will be subject to a three-year
holding period from the date of the award, but
no further performance conditions will apply.
Directors may sell sufficient shares to satisfy
the respective tax liability but must retain the
net number of shares until the end of this
three-year period.

Malus and clawback provisions will apply
(see explanatory notes).

Long Term Incentive
Plan (LTIP)

Incentivises
and rewards the
achievement of the
Company’s long-term
strategic objectives for
the business, through
the use of share-based
awards. To encourage
long-term shareholding
to retain Executive
Directors and provide
greater alignment with
shareholders’ interests.

Awards granted under the LTIP vest subject
to the achievement of applicable performance
conditions measured over at least a three-year
period. LTIPs may be made as conditional share
awards or in other forms (e.g. nil cost options)
if it is considered appropriate.

The Committee may use its discretion at
the end of the performance period to adjust
the final vesting outcomes if it considers that
the outcome does not reflect the underlying
performance of the business or participants
during the performance period, or if it considers
the payment is not appropriate in the context
of unforeseen, unexpected or exceptional
circumstances. Where exercised, the rationale
for this discretion will be fully disclosed to
shareholders in the relevant Annual Report.

The maximum value
of shares (at grant)
which can be made
under an award to an
individual in respect
of a financial year is
150% of salary.
Any awards made in
the same year under
the Company Share
Option Plan will be
taken into account
when applying these
limits. In exceptional
circumstances awards
totalling 200% of
salary may be made
in a year.

Awards that vest are subject to a further
two-year holding period after the vesting
date. Directors may sell sufficient shares to
satisfy the respective tax liability but must
retain the net number of shares until the
end of this two-year period.

The Committee retains the discretion to
allow dividends to accrue over the vesting
period in respect of the awards that vest.
(see explanatory notes).

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A L FA F I N A N C I A L S O F T WA R E H O L D I N G S P L C
2 0 2 1 D I R E C T O R S ’ R E M U N E R AT I O N P O L I C Y C O N T I N U E D

Element of
remuneration

Purpose and
link to strategy Operation

Company Share
Option Plan (CSOP)

Incentivises and
rewards the
achievement of
long-term targets
aligned to encourage
long-term shareholding
to retain Directors,
and provide greater
alignment with
shareholders’ interests.
The CSOP also
provides flexibility
in the retention
and recruitment of
Executive Directors.

Awards granted under the CSOP become
exercisable subject to such timings and
performance conditions as may be set by
the Committee.

Options are granted at market value or the
nominal share price if higher.

The Committee may use its discretion at the
end of the performance period to adjust the
final vesting outcomes if it considers that the
outcome does not reflect the underlying
performance of the business or participants
during the relevant period, or if it considers
the payment is not appropriate in the context
of unforeseen, unexpected or exceptional
circumstances. Where exercised, the rationale
for this discretion will be fully disclosed to
shareholders in the subsequent Annual Report.

All-employee share
plans

All-employee plans are
designed to encourage
share ownership within
the wider workforce.

Executive Directors are eligible to participate in
any all-employee share plan in place, on identical
terms to other participants. In the case of UK tax
qualifying plans, these will be operated in line with
HMRC guidance.

Shareholding
Requirement

To drive long-term,
sustainable decision-
making for the benefit
of the Company and
our shareholders.

The Executive Directors are required to build
up a shareholding equivalent to align with the
long-term interests of shareholders. Until the
requirement is met, 50% of any share awards
vesting (after any sales to cover tax liabilities)
should be retained.

Non-Executive Director Remuneration

Element of
remuneration

Purpose and
link to strategy Operation

Fees paid to the
Non-Executive
Directors

Fees are set at a level
to reflect the amount
of time and level of
involvement required
in order to carry out
their duties as
members of the Board
and its committees,
and to attract and
retain Non-Executive
Directors of the highest
calibre with relevant
commercial and other
experience.

Fees for Non-Executive Directors will be
determined by the Chairman and the
Executive Directors.

Additional fees are payable for acting as
Senior Independent Director, Committee chairs,
or for undertaking other duties. Fee levels will
be reviewed (though not necessarily increased)
annually and set with reference to the time
commitment and responsibility of the position
as well as taking into consideration market data
for roles in other companies of a similar size
and complexity.

Maximum
opportunity

Maximum value of
£30,000 at the time of
grant, including any
existing awards under
the CSOP. Overall
maximum of 200% of
salary in any one year
including any awards
under the LTIP rules.

Performance

Awards vest subject
to predetermined
performance
conditions assessed
over a minimum
period of three years.

Participation in
any approved
all-employee share
plans will be subject
to the same limits as
for other eligible
employees and, in
the case of any UK
tax qualifying plan,
will be subject to
the maximum limits
permitted by the
relevant tax legislation.

Executive Directors
are required to hold
shares equivalent
to 200% in value
of their salary.
Directors are required
to continue to hold
their shareholding
requirement, or,
if their level of
shareholding is below
the requirement, their
actual holdings, for
a period of two years
after leaving the
Company.

Maximum
opportunity

Details of the current
fee of levels for the
Non-Executive
Directors are set out
in the Annual Report
on Remuneration.

There is no prescribed
maximum annual
increase. Total fees
will not exceed the
maximum amount
provided in the
Company’s Articles
of Association.

The Committee
may apply conditions
to participation in
all-employee share
schemes, which
will apply to all
employees.

There are no
performance
conditions.

Other items

Benefits appropriate
to the role may be
provided. The
Non-Executive
Directors will have
the benefit of a
qualifying third
party indemnity
from the Company
and appropriate
Directors’ and
Officers’ liability
insurance. Travel and
reasonable expenses
incurred (including
any tax gross-up)
in the course of
performing their
duties may be paid
by the Company
or reimbursed.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202095

Malus will apply to awards under the DBSP
and LTIP. Clawback will apply to all vested
awards under the DBSP and LTIP and the
part of the annual bonus which is paid in
cash. These provisions may be invoked at
the Committee’s discretion at any time
within three years of the payment of cash
bonuses and six years of the grant of DBSP
and LTIP awards.

The Committee has the discretion to
invoke these provisions in the following
circumstances:

• Where there is a material misstatement

of any Company financial results;

• Where an error in assessing performance

conditions is discovered;

• Misconduct on the part of the individual;

and

• Where a material failure of risk

management by the Company is
identified, or in the event of serious
reputational damage to the Company.

Shareholding requirement
The Executive Directors are required to
build up a shareholding equal to at least
200% of salary, to align with the long-term
interests of shareholders. Until the
requirement is met, 50% of any share
awards vesting (after any sales to cover
tax liabilities) should be retained. In order
to generate alignment with shareholders
beyond departure and to drive risk-
conscious stewardship, a post-cessation
shareholding requirement will be placed
on Executive Directors. The post-cessation
requirement relates to those awards
awarded through incentive schemes by the
Company. Executive Directors will typically
be required to maintain a shareholding
equal to the lower of their in-post guideline
and their actual holding, for one year, and
50% of that level for the second year.

N O T E S T O T H E P O L I C Y TA B L E

Prior arrangements
The Committee reserves the right to
make any remuneration payments and/or
payments for loss of office (including
exercising any discretions available to
it in connection with such payments)
notwithstanding that they are not in
line with the Policy set out above where
the terms of the payment were agreed:

(i) Before the Policy set out above came
into effect (provided, in the case of
any payment agreed on or after
24 April 2018, it is in line with the Policy
approved by shareholders on that date);
or

(ii) At a time when the relevant individual
(or other person to whom this Policy
applies) was not a Director of the
Company and, in the opinion of the
Committee, the payment was not in
consideration for the individual
becoming a Director of the Company.
For these purposes ‘payments’ includes
the Committee satisfying awards of
variable remuneration and, in relation
to an award over shares, the terms
of the payment are ‘agreed’ at the
time the award is granted.

Selection of performance
conditions
For the annual bonus, the Committee
believes that a mix of financial and
non-financial targets is most appropriate
for the Company. Strategic and personal
objectives may be included where
appropriate to ensure delivery of key
business milestones. The Committee
will determine the measures and
weightings each year, based on the
key financial and strategic priorities
for the Company.

Performance under the LTIP will typically
be based on a combination of market and
non-market measures. This is so that the
Committee can assess the Company’s
performance with reference to a mix of
underlying financial and stock market
performance and encourages a focus
on long-term financial growth as well as
returns to shareholders. The Committee
will keep the measures and weightings
under review prior to the start of each
cycle to ensure that these remain
effective in driving the Executive
Directors to deliver long-term success.

Explanatory notes
Awards under any of the Company’s share
plans referred to in this report may:

a) Be granted as conditional share awards
or nil cost options or in such other form
that the Committee determines has
the same economic effect;

b) Have any performance conditions
applicable to them amended or
substituted by the Committee if
an event occurs which causes the
Committee to determine an amended
or substituted performance condition
would be more appropriate and not
materially less difficult to satisfy;

c) Incorporate the right to receive an

amount (in cash or additional shares)
equal to the value of dividends which
would have been paid on the shares
under an award that vests up to the
time of vesting (or where the award is
subject to a holding period, release).
This amount may be calculated
assuming that the dividends have
been reinvested in the Company’s
shares on a cumulative basis;

d) Be settled in cash at the Committee’s
discretion – although the Committee
has no intention to cash settle any
Executive Directors’ awards and would
do so only in exceptional circumstances
(such as where there was a regulatory
restriction on the delivery of shares)
or to settle tax liabilities arising in
connection with the acquisition of
shares; and

e) Be adjusted in the event of any variation
of the Company’s share capital or any
demerger, delisting, special dividend
or other event that may affect the
Company’s share price.

Discretion, malus and clawback
Variable pay awards may be made subject
to adjustment events. At the discretion
of the Committee, an award may be
adjusted before delivery (malus) or
reclaimed after delivery (clawback)
if an adjustment event occurs.

Our long-term incentive plans provide
the Committee with discretion in
respect of vesting outcomes that affect
the actual level of reward payable to
individuals. Such discretion would only
be used in exceptional circumstances and,
if exercised, the rationale for this discretion
will be fully disclosed to shareholders in
the relevant Annual Report.

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N O T E S T O T H E P O L I C Y TA B L E C O N T I N U E D

Illustrations of potential remuneration outcomes
The following charts illustrate the remuneration that could be received by each of
the Executive Directors for varying levels of performance in respect of the first year
in which the Policy is effective. The charts are based on the following assumptions:

Pay scenario Purpose and link to strategy

Fixed

Target

Fixed pay only, consisting of the salaries for 2021, benefits received in 2020
and the current pension policy (6% of salary for the CFO and COO) applied
to 2021 salary

Fixed pay, plus the potential value of the annual bonus at target (50% of the
maximum) and the long-term incentive at threshold (25% of the maximum)

Maximum

Fixed pay, plus the maximum potential value of the annual bonus and
the long-term incentive

Andrew Denton, CEO

Minimum

100%

£337,175

On-target

51%

37%

12%

£659,087

Maximum

26%

37%

£1,302,911

Duncan Magrath, CFO

Minimum

100%

£301,500

On-target

52%

36%

12%

£576,500

Maximum

26%

37%

£1,126,500

Matthew White, COO

Minimum

100%

£243,200

On-target

52%

36%

12%

£463,200

Maximum

26%

37%

£903,200

Fixed

Bonus

LTIP

Approach to recruitment
remuneration
The Committee will seek to align a
new Executive Director’s remuneration
package with the Policy as set out in
the Policy Table.

When determining a remuneration package
for a new appointment, the Committee will
take into consideration the size and scope
of the role, the skills and expertise of the
candidate, the external market rate for a
candidate of that experience, as well as
the importance of securing the preferred
candidate. Benefits will be limited to those
outlined in the Policy, with relocation
assistance provided where appropriate.
Awards under the LTIP and/or CSOP
that may be awarded to a new Executive
Director will not exceed 200% of salary
and the bonus opportunity will not
exceed 150% of salary.

Special consideration may be given in
the event that incentives accrued at a
previous employer are due to be forfeited
on the candidate’s leaving that company,
in which case the Committee retains the
discretion to grant awards with vesting on
a comparable basis to the likely vesting of
the previous employer’s award; any such
award is excluded from the maximum value
of incentives referred to above. For internal
candidates, long-term incentive awards
granted in respect of the prior role would
be allowed to vest according to their
original terms.

For the appointment of a new Chairman
or Non-Executive Director, the fee would
be set in accordance with the approved
Policy in force at that time. The length
of service and notice periods would be
set at the discretion of the Board, taking
into account market practice, corporate
governance considerations and the skills
and experience of the particular candidate
at that time.

Service contracts and
appointment letters
The service contracts of the Chairman
and the Executive Directors do not have
a specific duration but can be terminated
by not less than six months’ notice in the
case of the Chairman and the COO and
by not less than 12 months’ notice for
the CEO and CFO by either party.

Under the service contracts the Executive
Directors are entitled to a salary (reviewed
annually), pension contribution and
benefits, in addition to reimbursement
of reasonable expenses incurred by
them in the performance of their duties.

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97

The service contracts for Executive
Directors make no provision for
termination payments, other than
for payment in lieu of salary.

The Non-Executive Directors’ appointments
are for a fixed term of three years and are
subject to annual re-election by shareholders.
Under their letters of appointment, their
appointment is terminable by either party on
three months’ written notice except where
the Non-Executive Director is not reappointed
by shareholders, in which case termination is
with immediate effect. The Non-Executive
Directors are entitled to the reimbursement
of reasonable business expenses.

Termination of office
If the employment of an Executive
Director is terminated, any compensation
payable will be determined by reference
to the terms of the service contract in
force at the time. As variable pay awards
are not contractual, treatment of these
awards are determined by the relevant
rules. The Committee may structure
any compensation payments beyond
the contractual notice provisions in
the contract in such a way as it
deems appropriate.

The Company may at its discretion make
termination payments in lieu of notice
and contractual benefits. The service
agreements for the CEO, CFO and
COO allow for garden leave during
their notice period.

The appointment letters for the Non-
Executive Directors provide that no
compensation is payable on termination.

The Committee has a policy framework
for payments for loss of office by an
Executive Director, both in relation to
the service contract and incentive pay,
which is summarised below.

Category A
Voluntary resignation

and termination for cause

Category B
Agreed terms

Category C
Death or cessation by reason

of ill‑health, disability, injury,

redundancy or change of control

Fixed pay

Paid only until employment ceases.

Paid for the notice period.

Paid only until employment ceases or for notice
period depending on the reason for cessation.

Treatment will normally fall
between A and C, subject to
the discretion of the Committee,
the terms of any termination
agreement and the reasons for
the Executive Director’s departure.

Cessation during the financial year or after
the financial year end, but before payment date,
may result in bonus being payable (pro-rated
for the proportion of the financial year worked
unless the Committee determines otherwise).
Such bonuses may be settled wholly in cash.

Annual bonus

There is no contractual
entitlement to payments
under the annual bonus.

Bonuses delivered in shares
represent the bonus the
Executive Director has already
earned and carry no further
performance conditions.
Awards will normally be released
in accordance to the usual
schedule, unless the Committee
determines that awards should
be released at the time the
individual ceases employment.
Awards will normally be released
in full unless the Committee
determines otherwise.

LTIP awards

Unvested awards will lapse
on cessation of employment.
Vested awards subject to a
holding period will also lapse if the
Executive Director’s employment
is terminated for cause.

Treatment will normally fall
between A and C, subject to
the discretion of the Committee,
the terms of any termination
agreement and the reasons for
the Executive Director’s departure.

Bonuses delivered in shares represent the
bonus the Executive Director has already
earned and carry no further performance
conditions. Awards will normally be released
in accordance to the usual schedule, unless
the Committee determines that awards should
be released at the time the individual ceases
employment. Awards will normally be released
in full unless the Committee determines
otherwise. If the participant dies, awards will
normally be released at the time of their death
on the same basis as for other good leavers.

Awards will normally vest and be released at
the usual time. However, the Committee may
determine that awards should vest at the time
the individual ceases employment and be
released at that time or should be released at
some other time after cessation and before
the ordinary release date – such as following
the end of the performance period in the case
of an award to which a holding period would
otherwise apply. The extent of vesting will take
into account the extent to which the relevant
performance conditions have been met.
Awards are usually scaled back pro-rata to
take account of the proportion of the original
performance period that has elapsed when
the individual leaves (but with the Committee
having discretion not to scale back or to reduce
the scaleback). If the participant dies, awards
will normally vest at the time of their death
on the same basis as for other good leavers.
Vested awards subject to a holding period
will be released from that holding period
at the usual time, unless the Committee
determines the holding period should end
when the individual leaves employment.

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N O T E S T O T H E P O L I C Y TA B L E C O N T I N U E D

Category C
Death or cessation by reason

of ill‑health, disability, injury,

redundancy or change of control

Options will normally vest and be released at
the usual time. However, the Committee may
determine that the options should vest at the
time the individual ceases employment and
be released at that time or should be released
at some other time after cessation and before
the ordinary release date – such as following
the end of the performance period. The extent
of vesting will take into account the extent
to which the relevant performance conditions
have been met. Options are usually scaled
back pro rata to take account of the proportion
of the original performance period that has
elapsed when the individual leaves (but
with the Committee having discretion not to
scale back or to reduce the scaleback). If the
participant dies, options will normally vest at
the time of their death on the same basis as
for other good leavers.

Possible disbursements such as legal costs
and outplacement services.

Members of the Company Leadership
Team are invited to participate in the LTIP,
in order for there to be alignment between
the objectives of the Executive Directors
and senior management. We also continue
to encourage employees to become
investors in the Company by retaining
legacy share awards and through its
all-employee share schemes.

External Appointments
Executive Directors may hold external
directorships if the Board determines
that such appointments do not cause
any conflict of interest. Where such
appointments are approved and held,
it is a matter for the Board to agree
whether fees paid in respect of the
appointment are retained by the
individual or paid to the Company.

Category A
Voluntary resignation

and termination for cause

Category B
Agreed terms

CSOP

Unvested options will lapse
on cessation of employment.

Vested options may be exercised
at any time in the six months after
the date of cessation, after which
they will lapse.

Vested options not exercised
will also lapse if the Executive
Director’s employment is
terminated for cause.

Treatment will normally fall
between A and C, subject to
the discretion of the Committee,
the terms of any termination
agreement and the reasons for
the Executive Director’s departure.

Other payment

None.

Possible disbursements
such as legal costs and
outplacement services.

Change of control policy
In the event of a change of control of
the Company, LTIP and CSOP awards
will vest to the extent determined by
the Committee taking into account the
extent that the Committee determines
that the performance conditions have
been satisfied, and, unless the Committee
determines otherwise, the proportion of
the performance period that has elapsed.
DBSP awards will normally be released in
full, unless the Committee determines
otherwise. Alternatively, the Committee
may permit an Executive Director to
exchange their awards for equivalent
awards over shares in a different Company.
If the change of control is an internal
reorganisation of the Company, Executive
Directors will ordinarily be required to
exchange their awards (rather than awards
vesting), and the Committee may also
require the exchange of awards in other
circumstances, as it considers appropriate.
If other corporate events occur such as a
winding-up of the Company, demerger,
delisting, special dividend or other event
which, in the opinion of the Committee,
may materially affect the current or
future value of the Company’s shares,
the Committee may determine that
awards will vest on the same basis as
set out above for a change of control.

Consideration of
shareholder views
The Committee consulted and met
with the Company’s largest shareholders
prior to finalising this proposed Policy.
The Committee will continue to monitor
shareholder views when setting future
executive remuneration strategy and
will consult with shareholders prior
to any significant changes to the Policy.
The Committee takes full account of
the guidelines of investor bodies and
shareholder views in determining the
remuneration arrangements in operation
within the Company.

Consideration of employment
conditions elsewhere in
the Company
The Committee takes into account
the pay and employment conditions of
the wider employee population across
the Company when setting Executive
Director remuneration, and considered
this as context when reviewing the
Policy. While the Committee has not
consulted employees directly on the
Remuneration Policy for Executive
Directors, the Committee is made
aware of information such as workforce
demographics, diversity initiatives,
training programmes, engagement
levels and cultural initiatives, as well as
the remuneration principles and policies
that apply to the wider workforce. It is
expected that future salary increases
for Executive Directors will be in line
with the general employee population,
except in exceptional circumstances.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202099

Alignment of Remuneration Policy with the 2018 UK Corporate Governance Code

Governance in practice

The Remuneration Committee is committed to good corporate governance and as such takes into account a broad range of factors when
determining its Directors’ Remuneration Policy. The Committee considered both legal and regulatory requirements, associated guidance and the
views of shareholders and their representative bodies. Below is an outline of how the Committee works to ensure the principles of Provision 40 of
the 2018 UK Corporate Governance Code are met.

Clarity

Remuneration arrangements should
be transparent and promote effective
engagement with shareholders and
the workforce.

Simplicity

Remuneration structures should avoid
complexity and their rationale and operation
should be easy to understand.

Risk

Remuneration arrangements should ensure
that reputational and other risks from
excessive rewards, and behavioural risks that
can arise from target-based incentives plans
are identified and mitigated.

Predictability

The range of possible values of rewards
to individual Directors and any other limits
or discretions should be identified and
explained at the time of approving the Policy.

Proportionality

The link between individual awards, the
delivery of strategy and the long-term
performance of the Company should
be clear. Outcomes should not reward
poor performance.

Alignment to culture

Incentive schemes should drive behaviours
consistent with Company purpose, values
and strategy.

Alfa is committed to clear and transparent reporting and communication with its stakeholders.
The Committee actively engages with our shareholders on key decisions and Policy matters,
when required.

In December 2020 the Committee engaged with some of its larger shareholders to gain feedback
on its proposals for the new Directors’ Remuneration Policy, for which there was broad support.

The Alfa Remuneration Policy is aligned with longer-term shareholder interests and structured
to promote the Group’s financial and strategic priorities.

Alfa’s approach to its remuneration framework focuses on simplicity. The framework comprises
of three core elements to remuneration:

Fixed pay. This element comprises base pay, taxable benefits and pension.

Short‑term incentives. This element relates to an annual performance-related bonus which
incentivises delivery against both financial and non-financial measures. In total, 50% of any bonus
earned is paid in cash with 50% deferred into shares.

Long‑term incentives. This element relates to longer-term value creation through the LTIP.

In reviewing the 2021 Remuneration Policy, the preservation of simplicity was one of the key
factors that influenced the Committee not to make fundamental changes to the Policy.

The remuneration arrangements are split between short-term and long-term rewards coupled
with holding periods, deferred elements and malus and clawback provisions to drive the right
behaviours to incentivise the Executive Directors to deliver long-term sustainability of the
business and shareholder returns.

As a wider control, malus and clawback provisions apply to all participants of our long-term
incentive plans. The Remuneration Committee retains discretion to override formulaic
outcomes where these are not considered reflective of underlying performance.

The Remuneration Policy sets out scenario charts illustrating base pay, short-term incentives and
longer-term incentive outcomes under threshold, target and maximum performance scenarios.

The Committee assesses performance against a range of financial and non-financial measures
linked to our business strategy.

The Committee has the ability to override formulaic calculations and apply discretion.

The Committee regularly reviews pay policies for the wider workforce and is mindful of this
when setting remuneration for Executive Directors.

These should include consideration of performance metrics, governance requirements
and engagement with stakeholders.

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This section of the Directors’ Remuneration Report sets out the remuneration paid in 2020 and the proposed remuneration for
2021. This section will be put to an advisory shareholder vote at the 2021 AGM. During the year, the Remuneration Policy operated
as intended. Sections which are subject to audit are indicated as such.

Context to remuneration decisions
The Committee’s decision-making this year has taken into account a range of internal and external factors, including Alfa’s response to
Covid-19 and the experience of our stakeholders during this period. As previously outlined, Alfa took decisive action at the outset of
the pandemic to ensure the business was sustainable and our employee and stakeholder wellbeing was prioritised. The business acted
in line with the s172 governance guidelines while continuing to deliver exceptional results for shareholders. In particular, the Committee
was mindful that:

• Alfa requested no Government support from the Job Retention Scheme
• No employee received a pay cut and bonus payments were maintained
• Shareholder guidance was maintained throughout the period, with the final results for the year, exceeding the profit forecast.
• A special dividend in the amount of £44.2 was paid to shareholders

Single total figure of remuneration (audited)

The following tables set out the total remuneration received by Executive Directors and Non-Executive Directors in 2020 and 2019.

£’000s

Executive Directors

Andrew Page

Andrew Denton

Duncan Magrath

(appointed 23 March 2020)

Matthew White

2020

2019

2020

2019

2020

2019

2020

(appointed 9 October 2019) 2019

Non‑Executive Directors

Chris Sullivan

(appointed 18 July 2019)

Steve Breach5

(appointed 9 August 2019)

2020

2019

2020

2019

Adrian Chamberlain

2020

(appointed 24 March 2020)

Charlotte de Metz

(appointed 24 March 2020)

2019

2020

2019

Salary
and fees

Benefits1

Pension2

Total fixed
remuneration

Annual
bonus3

Long-term
incentives4

Total variable
pay

Total figure
remuneration

374

322

214

–

220

–

387

388

337

338

233

–

243

–

2176

–

176

–

217

–

176

–

387

388

337

338

450

–

419

–

Benefits corresponds to the taxable value of benefits receivable during the relevant financial year and principally include company car (or cash equivalent),
life assurance, travel insurance and private medical insurance.

Pension – corresponds to the amount contributed to defined contribution pension plans or a cash payment in lieu of a pension contribution. Andrew Page
and Andrew Denton have opted out of the pension scheme.

Annual bonus – corresponds to the amount earned in respect of the relevant financial year. Details of 2020 targets are set out on page 101. The Executive
Chairman and the CEO waived any eligibility for a bonus in both 2020 and 2019. The COO was included in a separate Company-wide bonus arrangement
before his appointment to the Board and any award under this scheme, prior to his appointment to the Board, has been excluded from the table above.

Long-term incentives – corresponds to the amount vesting to the Executive Directors in respect of a performance period ending at the conclusion of the
relevant financial year. The first awards under the LTIP were granted in 2020, and vest subject to performance to 31 December 2022 (and will accordingly
be captured, to the extent these vest, in the 2022 Annual Report).

In 2019, Steve Breach’s fees include £19,578 of additional fees for specific additional advice provided during October to December 2019. A payment of
£5,085 was paid in January 2020 to cover work completed on the finance remediation plan.

Duncan Magrath’s annual bonus was pro-rated from his start date of 23 March 2020.

Base salary
The Executive Directors’ salaries were reviewed in 2020. It was determined that no increase would be awarded for the period
from 1 January 2020 to 31 December 2020.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020101

2020 annual bonus
The 2020 annual bonus performance measures were selected to reflect the Company’s annual and long-term objectives and its financial
and strategic priorities, as appropriate. Performance targets are set to be stretching, taking into account a range of reference points,
including the Company’s budget and third party analyst forecasts, as well as the Group’s strategic priorities.

In respect of the annual bonus, the following measures were approved by the Committee for 2020:

• Revenue for the year;
• Operating profit, being operating profit excluding certain non-recurring and non-cash exceptional items as a ratio of revenue;
• Operating free cash flow conversion being cash flow generated from operations after deducting the settlement of derivative

financial instruments and margin calls and capital expenditures as a percentage of EBIT, as defined above; and

• Personal performance based on the qualitative assessment of the individuals performance. Further details on performance

outcomes for the non-financial measures are shown in the second table.

The Executive Chairman and CEO have waived their entitlement to a bonus for the 2020 performance year.

The table below shows the bonus outturn relating to each measure:

Measure

Revenue

EBIT

Operating free cash flow conversion

Personal performance

Total (as a percentage of opportunity)

Weighting

Target

Threshold

Maximum

£65.9m

£8.8m

170%

30%

15%

25%

95%

85%

80%

105%

120%

25%

Actual

£78.9m

£23.9m

114%

CFO: 22%
COO: 20%

Straight-line vesting occurs between threshold and maximum.

Further commentary on non-financial measures
The personal measures described above are assessed with reference to the following objectives:

Objective

Commentary on performance achieved

Duncan Magrath Development of Finance team Core team in place, bolstered with new permanent employees

Internal tax capability

Tax Specialist recruited and Corporate tax issues resolved

Investor Relations strategy

More proactive communication to the market during the year

Governance & Risk
Management

Management Information

New External Audit partner appointed

New management pack created and balanced scorecard.
Significant improvement in timeliness of information.

2020 bonus
pay-out

100%

88%
80%

CFO: 82%
COO:80%

Achievement

88%

Matthew White

People

Built, developed and retained a smart, diverse team

80%

Implementation

Delivered successful implementation projects

Operations

Technology

Maintenance & Hosting

Enabled partner delivery and simplified Alfa Start
implementation methodology

Delivered high quality software to our customer
and secure technical infrastructure for Alfa

High quality and highly profitable maintenance
and hosting provided to our customers

Based on the achievements listed above, the Committee agreed that the final vesting under the 2020 bonus would be 82% of the
maximum for Duncan Magrath and 80% of maximum for Matthew White. In confirming this outcome, the Committee took into
consideration the broader financial and operational performance of Alfa during the year, and the strong and effective leadership
demonstrated by the Executive Directors it was determined that no adjustments were required to the formulaic outcome.

The bonus payment for Duncan Magrath as incoming CFO would be pro-rated to reflect his period in role.

In accordance with the Remuneration Policy, 50% of these bonus amounts have been paid in cash, with the remaining 50% to be
converted to Alfa shares and deferred for three years.

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Executive

Duncan Magrath

Matthew White

Base salary

£275,000

£220,000

Maximum
opportunity
(% salary)

Performance
outcome (% of
maximum)

125%

100%

82%

80%

Bonus outcome
£

…of which cash
£

…of which
shares

£217,044

£nil

£217,0441

£176,000

£88,000

1. Duncan Magrath opted for all of his 2020 annual bonus to be deferred into shares, following satisfaction of the respective tax liability.

Long-Term Incentive Plan – awards granted in the year

Share awards were made to the Executive Directors under the LTIP on 3 June 2020 equivalent to 200% of salary for the CFO and
100% of salary for the COO. The maximum LTIP opportunity under the proposed Policy in normal circumstances is 150% of salary.
The Committee approved an LTIP share award for Duncan Magrath of 200% of salary in his first year to secure his employment,
in accordance with the Policy.

The Executive Chairman and CEO have waived their entitlement to participate in the 2020 LTIP.

Duncan Magrath

3 June 2020

200%2

740,242

0.74

100%

Date of award

Face value
(% of salary)

Number of
shares granted

Average share
price at grant
(£)1

Threshold
vesting
(% of face
value)

Matthew White

3 June 2020

100%

296,097

0.74

100%

Performance
period

1 January
2020 – 31
December
2022

1. The share price used to calculate the number of performance shares was £0.74, the closing share price on the day preceding the date of the award (2 June 2020).

2. Duncan Magrath was awarded an LTIP of 200% of salary in his first year of employment.

The LTIP awards are subject to two equally weighted performance metrics: relative total shareholder return and earnings per share:

Measure

Description

Total shareholder return (TSR)

Earnings per share (EPS)

Measured with reference to the FTSE
smallcap excluding investment trusts
and the Company

Measured with reference to EPS
performance in the year ending
31 December 2022

Weighting

Threshold/
target

50%

Median

Maximum
target

Upper
quartile

50%

2.3p

2.8p

Straight-line vesting occurs between threshold and maximum for both TSR and EPS elements of the award.

The three-year period over which performance will be measured began on 1 January 2020 and will end on 31 December 2022.
Any awards vesting for performance will be subject to an additional two-year holding period, during which malus and clawback
provisions will continue to apply.

Long-Term Incentive Plan – awards vesting in the year
There were no LTIP awards due to vest in 2020.

Pension entitlements (audited)
The only element of remuneration that is pensionable is basic annual salary. During 2020, employer’s pension contributions, or a cash
payment in lieu of pension contributions, were payable to the CFO and COO, at a rate of 6% of salary as aligned with the broader
workforce, and defined in the 2021 Remuneration Policy.

External appointments (audited)
Executive Directors are allowed to accept one appointment outside the Company, with the prior approval of the Board. Any fees
may be retained by the Director, although this is at the discretion of the Board. During 2020 and up to the date of this report, none
of the Executive Directors who held office during the year under review held external appointments for which they received a fee.

Payments for loss of office (audited)
There were no payments for loss of office during the year.

Payments to past directors (audited)
There were no payments to past Directors for loss of office during the year.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020103

Statement of Directors’ shareholdings and scheme interests (audited)
Executive Directors are expected to build and hold Alfa shares of at least 200% of their annual salary to align with the long-term
interests of shareholders, with a requirement to retain 50% of any share awards vesting until the 200% requirement is met. Under the
new Policy, a post-employment shareholding requirement will apply whereby 100% of the shareholding requirement must be held for
the first year following departure from Alfa and 50% for the second year. Shareholding requirements and the number of shares held by
Directors during the year and as at 31 December 2020 are set out in the table below:

Andrew Page

Andrew Denton

Matthew White

Duncan Magrath

Chris Sullivan

Steve Breach

Adrian Chamberlain

Charlotte de Metz

Shares owned
outright at 31
December 2020

181,764,821

15,891,327

552,368

100,000

–

43,983

–

Interests in
share incentive
schemes without
performance
conditions

Interests in
share incentive
schemes with
performance
conditions

Shares owned
outright at 31
December 2019

–

276,183

–

181,224,631

16,421,018

296,097

740,242

–

276,184

–

6,009

–

Shareholding
requirement
(% of
requirement
achieved)1

achieved

24%

n/a

1. Calculated using the share price of £1.32 (as at 31 December 2020)

No LTIPs were exercised during the year and there were no unexercised vested shares held at 31 December 2020.

The Executive Chairman and Chief Executive Officer have significant direct or indirect shareholdings in the Company.

Dilution
Awards under Alfa incentive plans may be satisfied by treasury shares or the issue of new shares or the purchase of shares in the market.
Under Investment Association guidelines, the issue of new shares or reissue of treasury shares under a plan, when aggregated with
awards under all of a company’s other schemes, must not exceed 10% of the issued ordinary share capital (adjusted for share issuance
and cancellation) in any rolling 10-year period. As at 31 December 2020 this limit had not been exceeded.

Fees for the Non-Executive Directors
The fees were agreed on appointment and have remained unchanged since that time. A summary of current fees is shown below:

£’000s

Chris Sullivan

Steve Breach

Adrian Chamberlain

Charlotte de Metz

Basic fees

Audit and
Risk Chair

Remuneration
Chair

–

Senior
Independent
Director

–

There is no additional fee payable to the Chair of the Nomination Committee.

All the Non-Executive Directors have letters of appointment, with the Company, for an initial three year term, subject to annual
reappointment at the AGM. The appointment letters for the Non-Executive Directors provide that no compensation is payable
upon termination. Letters of appointment are available for inspection at the Company’s registered office. Details of the appointment
terms of the Non-Executive Directors are as follows:

Chris Sullivan

Steve Breach

Adrian Chamberlain

Charlotte de Metz

Start of current term

Expiry of initial term

18 July 2019

9 August 2019

24 March 2020

17 July 2022

8 August 2022

23 March 2023

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Total shareholder return performance
The graph below shows Alfa’s TSR performance from Admission in May 2017 to 31 December 2020 against the TSR performance of
the FTSE small cap index (excluding investment trusts). The graph shows the total shareholder return generated by both the movement
in share value and the reinvestment over the same period of dividend income. As Alfa is a constituent member of the FTSE small cap,
the Committee considers that it is the appropriate index for comparative purposes. This graph has been calculated in accordance with
the Directors’ Remuneration Reporting Regulations and shows total shareholder return from the date of listing to 31 December 2020.

Total Shareholder Return (for the period from 25 May 2017 to 31 December 2020)

Value (£) (rebased)

£175

£150

£100

£75

£50

£25

£0

May-17

Dec-17

Dec-18

Dec-19

Dec-20

Alfa Financial Software Holdings PLC

FTSE Small Capitalisation Index Ex Investment Trusts

CEO single figure of remuneration and variable pay outcome

Year

2020

2019

2018

2017

CEO single
figure of
remuneration

Annual bonus
pay-out (as a %
of maximum
opportunity1

LTIP vesting
(as a % of
maximum
opportunity)2

£337,174

£338,129

£337,944

£349,478

n/a

1. The CEO waived any eligibility for a bonus in 2020, 2019, 2018 and 2017.

2. The CEO waived any eligibility to participate in the long-term incentive awards in respect of the 2020, 2019, 2018 and 2017 performance years.

Percentage change in CEO remuneration compared with employees
The table below shows the average increase in each component between the CEO and the average employee in the Company from
Admission to 2020:

CEO

Alfa employees

% change in base salary

% change in bonus earned

% change in benefits

2020: 0%
2019: 0%
2018: 0%
2017: 0%

2020: 9%
2019: (3%)
2018: 1%
2017: 2%

2020: 0%
2019: 0%
2018: 0%
2017: 0%

2020: (1%)
2019: (13%)
2018: (37%)
2017: (33%)

2020: (6%)
2019: 0%
2018: (42%)
2017: 87%

2020: 13%
2019: (42%)
2018: 22%
2017: (11%)

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020

105

Percentage change in Executive and Non-Executive Director remuneration
The table below shows the percentage increase/decrease in each Director’s salary/fees, taxable benefits and annual incentive plan
between 2019 and 2020 compares with the average percentage increase in each of those components of pay for the UK-based
employees of the Group as a whole.

Disclosure for all Directors in addition to the CEO has been added this year in line with the new requirements under the
EU Shareholder Rights Directive II and over time a 5-year comparison will be built up. Alfa Financial Software Holdings PLC
employs only the Non-Executive Directors and therefore a subset of the Group’s employees has been used.

% change for the end of the comparative period to the end of the reporting period

Base salary/
fees

Benefits

Annual bonus

Andrew Page (Chairman)

Andrew Denton (CEO)

Duncan Magrath (CFO)

Matthew White (COO)

Steve Breach (NED)

Adrian Chamberlain (NED)

Charlotte de Metz (NED)

Chris Sullivan (NED)

Colleague pay

n/a

(6%)

n/a

13%

(1%)

CEO pay ratio
The table below sets out the pay ratios for the CEO in relation to the equivalent pay for the lower quartile, median and upper quartile
employees (calculated on a full-time equivalent basis). The ratios have been calculated in accordance with the Companies (Miscellaneous
Reporting) Requirements 2018. The CEO pay ratio data will be built upon annually until a rolling 10-year dataset is produced.

The methodology adopted for calculating the ratio was ‘Option A’ which entailed calculating the total full-time equivalent (FTE) pay
and benefits for all UK employees on the December 2020 payroll. Employees were then ranked based on their FTE remuneration
from low to high in order to identify those whose remuneration placed them at the 25th, 50th (median) and 75th percentile points.
The CEO’s single total figure of remuneration (STFR) was then measured against these percentiles, to produce the three pay ratios.

Option A was chosen because it was deemed to be the most statistically accurate method for this reporting purpose. Having reviewed
the analysis, the Company believes the median pay ratio to be consistent with the Company’s general employee pay, reward and
progression policies. The Company carries out bi-annual salary reviews and annual reviews of benefits packages. Salary awards are
made with reference to the outputs of annual industry benchmarking exercises. The Company did not omit any components of pay
and benefits from the calculations.

Year

2020

2019

2020

2019

Method

25th percentile
(lower quartile)

Pay ratio 50th
percentile
(median)

75th percentile
(upper quartile)

5:7:1

4:3:1

4:4:1

3:2:1

3.2:1

£’000s 25th percentile 50th percentile 75th percentile

Total remuneration

Salary only

Total remuneration

Salary

59.5

55.1

59.0

57.1

78.5

73.2

76.2

71.2

106.7

98.1

106.3

95.7

This is the second financial year in which the Company reported information on ratios between CEO and average staff pay under the
amendments to the Companies (Miscellaneous Reporting) Regulations in 2018.

There has been a reduction in the ratio reported at the 50th percentile and figures indicate that there have been increases in total
remuneration at all percentiles across the Company compared to 2019. Despite the impact of the pandemic, the Company proceeded
with the annual pay-rise and promotion cycle and continues to review and remunerate executive pay in line with the remuneration of
the overall employee population.

The Committee is mindful, when setting pay for the CEO, of the remuneration context of the wider workforce. The CEO’s remuneration
comprises both fixed and variable elements, with a higher proportion of his pay linked to performance in line with shareholder expectations.
Given both the nature of the role and his ability to influence Alfa’s performance, it is felt that this is an appropriate approach and as such the
Committee believes the median pay ratio is appropriate in the context of wider workforce pay conditions. It is expected as multi-year
performance share plans vest, pay ratios will move and flex.

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Rewarding our people and wider workforce engagement
Alfa’s approach to all-employee reward is focused on providing a competitive package to attract, retain and incentivise our employees
to deliver for our customers, business and shareholders. The Committee regularly reviews details of the arrangements for the broader
workforce and this informs decisions on remuneration for the Executive Directors and senior management. Alfa continues to review
salaries Group-wide to ensure that we remain a competitive employer within the local market. Salaries for Executive Directors, senior
managers and the rest of the workforce are all determined with reference to the same factors such as technical expertise, experience
and performance, and increases across these populations are reviewed to ensure they are broadly aligned. The Committee also took
an active role in determining rewards for the Company Leadership Team. Further information on key initiatives for our people and
what makes Alfa unique can be found on pages 57 to 59. In addition to a competitive salary, all employees receive the opportunity
to earn a performance-related bonus, private medical care, matched contribution pension and death in service life assurance.
The Company Leadership Team and certain employees are eligible to participate in long-term incentive schemes.

During the review of the Directors’ Remuneration Policy, the Committee sought input from the Executive Directors, ensuring that any
conflict of interest was suitably mitigated. It was concluded that the existing model of base salary; annual bonus; and a three-year LTIP
with two year holding period was well understood by the business, supported Alfa’s culture and continued to be appropriate to drive
business performance going forward.

Relative importance of spend on pay
The following table illustrates Alfa’s revenue and operating profit in relation to spend on pay for all employees for all employees for
the period and last financial year.

£’000s

Total personnel costs (note 7 to the consolidated financial statements)

Average number of employees (note to the consolidated financial statements)

Revenue (consolidated income statement)

Operating profit (see note 4.2 to the consolidated financial statements)

2020

41,729

341

78,870

23,946

2019

Change

36,985

313

64,480

13,709

13%

22%

75%

A special dividend of £44.2m was paid to the shareholders in 2020. For more information on the special dividend and expenditure on
remuneration of all employees, see pages 152 and 141 respectively.

Implementation of the Remuneration Policy in 2021
2021 Executive Directors’ base salaries
The Committee carried out a review of the Executive Directors’ remuneration packages in late 2020 and was comfortable that the
salary, bonus and LTIP opportunity remained appropriate. No changes will be introduced for the Executive Directors for 2021.

The table below shows the salaries for the Executive Directors as at 1 January 2021 in comparison to base salary at 1 January 2020:

£’000s

Andrew Page

Andrew Denton

Duncan Magrath

Matthew White

1 January 2021 1 January 2020

% change

374

322

275

220

374

322

2751

220

1. From appointment as Chief Financial Officer on 23 March 2020.

Pension and benefits
For 2021, the CFO and COO will receive a pension contribution of 6% of salary (in line with that available to the wider workforce)
or an equivalent cash allowance. No changes are proposed to the benefits provided.

2021 annual bonus
The Chairman, CEO and COO will be entitled to a maximum annual bonus equal to 100% of salary for 2021 with the CFO entitled to
a maximum annual bonus of 125% of salary. The following measures have been selected for the 2021 annual bonus performance year:

Measure

Operating profit

Revenue

Operating free cash flow conversion

Personal performance

Weighting

37.5%

Modifier

25%

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020107

As the business moves towards targeting more subscription revenues, the Committee have taken the opportunity to review the
performance measures for the 2021 annual bonus. We are of the view that our existing measures of revenue, operating profit
and personal objectives continue to be appropriate for the business. We have reviewed the cash measure and consider this should
be a modifier rather than an absolute incentive in its own right, as the Committee believe this will better match the strategy of the
business. This along with the already strong cash collection performance means that targeting individual cash targets as a separate
measure becomes less relevant. Maintaining the cash element of the bonus remains extremely important, and it is essential that the
current strong cash performance does not deteriorate. This means that the incentive pay-out based on revenue and operating profit
can be improved or reduced depending on whether the free cash flow conversion is above or below 100%, with a cap of 25% in either
direction. However the modifier cannot increase the revenue and operating profit measure above its maximum, it can only improve
a shortfall, or reduce a pay-out.

Each bonus measure has a target, failure to meet a minimum percentage of the target will result in no bonus being awarded for that
element. Achieving a maximum percentage of target will result in the maximum bonus being awarded under the formula (subject to
the minimum operating profit target being achieved), although as described earlier, the final determination is made by the Committee
taking all available factors into account. The detailed bonus targets for the coming year are considered to be commercially sensitive.
However, the Committee will provide an appropriate explanation of the bonus outcomes in the 2021 Directors’ Remuneration Report

In accordance with the Policy, 50% of any bonus earned will be deferred into shares for a three-year holding period.

2021 Long-Term Incentive Plan
The normal maximum LTIP opportunity under the Policy is 150% of salary. For 2021, the award opportunity will remain at 100%
of salary for the CEO and COO, and 150% of salary for the CFO. Following vesting, awards will be subject to a subsequent holding
period of two years, with the entirety of any award vesting released after two years.

The Committee has agreed the following measures for the LTIP, with an equal weighting applied to each measure:

• TSR; and
• EPS.

The comparator group for the TSR is the constituents of the FTSE Small Cap, excluding investment trusts. Median performance over
the three-year performance period will result in 25% vesting, with 100% vesting if upper quartile performance is achieved. The EPS
performance conditions are being finalised and details will be included in the RNS announcing the awards.

2021 Non-Executive Director remuneration
Non-Executive Directors do not participate in any of the Company’s share incentive arrangements, nor do they receive any benefits.
Fees for Non-Executive Directors are reviewed annually, and are set by the Chairman and the Executive Directors. Following the annual
review of Non-Executive Director fees, no changes are proposed for the 2021 fees. It was determined that the fees will remain at the
following level:

Base fee

Additional fee for chairing Audit and Risk Committee or Remuneration Committee (subject to maximum fees £65,000)

Fee for the Senior Independent Director (including chairing Committees)

£55,000

£10,000

£65,000

Appointment of external advisors
During the year, the Remuneration Committee and the Company retained independent external advisors to assist on various aspects
of the Company’s remuneration and shares schemes. Mercer Kepler have acted as external advisers to the Committee for the Executive
remuneration incentives and provided updates on market trends. Tapestry Global Compliance LLP (Tapestry) have acted as external
advisors to the Committee, to provide support and information on our all-employee share schemes. None of the advisers has any
other connection with the Company or its Executive Directors. Mercer Kepler’s fees for 2020 amounted to £8,262; Tapestry Global
Compliance LLP fees were £41,957. The Committee is satisfied that Mercer Kepler (who is a member of the Remuneration Consultants
Group and abides by its Code of Conduct) and Tapestry continued to maintain independence and objectivity.

Statement of shareholding voting
The 2019 Directors’ Remuneration Report was approved by shareholders at the 2020 AGM. The Directors’ Remuneration Policy was
approved at the 2018 AGM. The votes cast were as follows:

£’000s

Directors’ Remuneration Report (2020 AGM)

Directors’ Remuneration Policy (2018 AGM)

For and on behalf of the Board

Adrian Chamberlain
Chair, Remuneration Committee
22 March 2021

For

Against Votes withheld

99.99%

99.78%

0.01%

0.22% 16,744,191

Strategic reportGovernanceFinancial statementsOther information108

S TAT E M E N T O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S

The Directors are responsible for
preparing the Strategic Report and
the Directors’ Report, the Directors’
Remuneration Report, the Separate
Corporate Governance Statement and
the financial statements in accordance
with applicable law and regulations.

Company law requires the directors to prepare
Group and Company financial statements for
each financial year. The directors have elected
under company law to prepare group financial
statements in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006
and are additionally required under the
Listing Rules of the Financial Conduct
Authority to prepare the group financial
statements in accordance with International
Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. The
directors have elected under company
law to prepare the company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable law).

The group financial statements are
required by law and international
accounting standards in conformity
with the requirements of the Companies
Act 2006 and international financial
reporting standards adopted pursuant
to Regulation (EC) No 1606/2002
as it applies in the European Union
to present fairly the financial position
and performance of the group; the
Companies Act 2006 provides in
relation to such financial statements
that references in the relevant part of
that Act to financial statements giving
a true and fair view are references to
their achieving a fair presentation.

Under company law the directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of affairs
of the group and the company and of the
profit or loss of the group for that period.

In preparing each of the group and
company financial statements, the
directors are required to:

a. select suitable accounting policies
and then apply them consistently;

b. make judgements and accounting

estimates that are reasonable and prudent;

c. for the group financial statements,

state whether they have been prepared
in accordance with international
accounting standards in conformity
with the requirements of the Companies
Act 2006 and international financial
reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it
applies in the European Union;

d. for the company financial statements,

state whether applicable UK accounting
standards have been followed, subject
to any material departures disclosed
and explained in the company
financial statements;

e. prepare the financial statements

on the going concern basis unless it
is inappropriate to presume that the
group and the company will continue
in business.

The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the group’s
and the company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the group
and the company and enable them to
ensure that the financial statements
and the Directors’ Remuneration Report
comply with the Companies Act 2006 and,
as regards the group financial statements,
Article 4 of the IAS Regulation. They are
also responsible for safeguarding the
assets of the group and the company and
hence for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.

Directors’ statement
pursuant to the Disclosure
and Transparency Rules
Each of the directors, whose names and
functions are listed on pages 66 to 67
confirm that, to the best of each
person’s knowledge:

a. the financial statements, prepared

in accordance with the applicable set
of accounting standards, give a true and
fair view of the assets, liabilities, financial
position and profit of the company
and the undertakings included in the
consolidation taken as a whole; and

b. the Strategic report contained in the
Annual Report includes a fair review
of the development and performance
of the business and the position of the
company and the undertakings included
in the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face.

The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Alfa Financial Software
Holdings PLC website.

Legislation in the United Kingdom governing
the preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.

This responsibility statement was
approved by the Board of Directors
on 22 March 2021 and is signed on
its behalf by:

Andrew Denton
Chief Executive Officer
22 March 2021

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020D I R E C T O R S ’ R E P O R T

Statutory information
The Directors of Alfa present their report and the audited financial statements for
the year ended 31 December 2020. This Report includes information required by
the Companies Act 2006 and the Listing Rules 9.8.4R of the UK Financial Conduct
Authority’s Listing Rules and forms part of the management report as required by
the Disclosure and Transparency (DTR) Rule 4.

Additional information which is incorporated by reference into this Directors’ report
can be located by reference the tables below.

As permitted by the Companies Act 2006, the Directors’ Report includes the disclosures
in the Strategic Report on:

Performance and future development in the business

Important events affecting the Group since the financial year

Greenhouse gas emissions and energy consumption

Key Financial Performance indicators

Principal risks facing the Group

Long-term viability statement

Employment of disabled people

Employee involvement

Location in
annual report
(page)

1 to 63

152

36 to 37

44 to 49

50 to 51

109

57 to 59

The Group is required to disclose certain information under Listing Rule 9.8.4R in the
Directors’ Report or advise where such relevant information is contained. This information
can be found in the following sections of the Annual Report and Accounts:

Listing rule requirement

Location in annual report

Details of any long-term incentive schemes

Directors’ Remuneration Report

Details of any arrangements under which
a Director has waived emoluments

151

88 to 107

101 to 102

Details of any contract of significance in which
a Director is or was materially interested

See section below headed ‘Relationship
Agreement with controlling shareholder’

Board statement in respect of Relationship
Agreement with the controlling shareholder

See section below headed ‘Relationship
Agreement with controlling shareholder’

Principal activities
The principal activity of the Alfa
Group is the provision of software and
software-related services to the asset
finance industry. Alfa is a public company
limited by shares and is incorporated
and domiciled in England. Its shares are
listed on the London Stock Exchange.
The registered office is Moor Place,
1 Fore Street Avenue, London, EC2Y 9DT,
United Kingdom. Alfa’s registration no.
is 10713517. The principal activity of the
Company is that of a holding company.

The Company’s registrar is Equiniti Limited
situated at Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA.

Financial risk management
The financial risk management objectives and
policies of the company and the exposure of
the company to price risk, credit risk, liquidity
risk and cash flow risk are disclosed in Note 3
to the financial statements.

Subsidiaries and branches
outside of the UK
The Group has subsidiaries in the United
States of America, Germany, Australia
and New Zealand and a subsidiary of
the Company is registered as a branch
of an overseas company in South Africa.
Further details of these can be found in
note 31.2 to the accounts on page 152.

Contracts of significance
We have no contracts deemed significant
other than the Relationship Agreement
between the Company and the Controlling
Shareholder, as detailed on page 111.

Research and development
The Group continued to invest in product
research and development throughout the
year. The Strategic report, specifically the
Financial review on pages 38 to 41, sets out
the research and product development
expensed and £0.65m was capitalised as
internally generated intangible assets

109

during the year ended 31 December 2020,
as disclosed in note 15 to the consolidated
financial statements.

Employee involvement
We place considerable value on the
involvement of our employees, viewing and
treating them as valued team members and
an integral part of our business and our
success. We continue to keep them informed
on matters affecting them through both
formal and informal meetings and the Group
intranet, including CEO updates. Teams are
consulted regularly on a wide range of
matters affecting their current and future
interests. We have established share
ownership schemes for use throughout the
Company and intend to use them to broaden
share ownership across the Company.

Further information on team engagement,
as monitored by our internal employee
surveys, is included in the ESG report on
pages 56 to 63.

Employee diversity
and inclusion
Our policy for the Alfa team and all
applicants for employment is to match the
capabilities and talents of each individual
to the appropriate job. We are committed
to ensuring equality of opportunity in all
employee relations. We aim to ensure
that no employee, potential employee,
customer, visitor or supplier will receive
less favourable treatment on the grounds
of sex, pregnancy, disability, religious
beliefs, marital status, race, ethnic origin,
nationality, age, sexual orientation or colour.

Disability
With regard to existing team members
and those who may become disabled,
Alfa’s policy is to examine ways and means
to provide continuing employment under
the existing terms and conditions and to
provide training and career development,
including promotion, where appropriate.

Directors
The names of the persons who, at any
time during the financial year and up to
the date of this report, were Directors
of the Company are:

Date of appointment

Steve Breach

9 August 2019

Adrian Chamberlain

24 April 2020

Charlotte de Metz

24 April 2020

Andrew Denton

6 April 2017

Duncan Magrath

24 April 2020

Andrew Page

Chris Sullivan

4 May 2017

18 July 2019

Matthew White

9 October 2019

Strategic reportGovernanceFinancial statementsOther information110

D I R E C T O R S ’ R E P O R T C O N T I N U E D

Appointment and removal of a director
The rules governing the appointment and
removal of a director are set out in the
Articles of Association of the Company.
The Articles of Association may be
amended by a special resolution of the
shareholders. Specific details relating to
the Principal Shareholder, CHP Software
and Consulting Limited and its right to
appoint directors are set out in the
Directors’ report on page 111.

All Directors will stand for re-election
on an annual basis, in line with the
recommendations of the 2018 Code.

The Articles of Association are available
on the corporate governance page of
our investor relations website investors.
alfasystems.com/corporate-governance.

Powers of the Directors
Specific powers relating to the allotment
and issuance of ordinary shares and the
ability of the Company to purchase its
own securities are also included within
the Articles and such authorities are
submitted for approval by the
shareholders at the AGM each year.

Since listing, the Directors have not
exercised any of their powers to issue,
or purchase, ordinary shares in the share
capital of the Company.

Directors’ interests
The Directors’ interests in and options over
ordinary shares in the Company are shown
in the Annual Report on Remuneration on
page 103. Since the end of the financial
year and to the date of this report, there
have been no changes to such interests.

In line with the requirements of the
Companies Act, each Director has
notified the Company of any situation
in which he or she has, or could have, a
direct or indirect interest that conflicts,
or possibly may conflict, with the interests
of the Company (a situational conflict).
These were considered and approved
by the Board in accordance with the
Articles and each Director informed of
the authorisation and any terms on which
it was given. All Directors are aware of
the need to consult with the Company
Secretary should any possible situational
conflict arise, so that prior consideration
can be given by the Board as to whether
or not such conflict will be approved.

Directors’ indemnities
Each Director of the Company has the
benefit of a qualifying indemnity, as defined
by section 236 of the Companies Act, and
as permitted by the Articles, as well as
Directors’ and Officers’ liability insurance.

No amount was paid under any of
these indemnities or insurances during
the year other than the applicable
insurance premiums.

Share capital
The Company’s ordinary shares are
listed on the London Stock Exchange.
The authorised share capital of the
Company as at 31 December 2020
and 22 March 2021, being the latest
practicable date prior to the date of this
Annual Report, comprises 300,000,000
ordinary shares of 0.1 pence each.
Further information regarding the
Company’s issued share capital can
be found in note 26 of the Company
financial statements.

There have been no movements in the
Company’s issued share capital since
31 December 2020 through to the date
of this Report.

Shareholders’ voting rights
All members who hold ordinary shares are
entitled to attend and vote at the AGM.
On a show of hands at a general meeting,
every member present in person shall have
one vote and on a poll, every member
present in person or by proxy shall have
one vote for every ordinary share held.
No shareholder holds ordinary shares
carrying special rights relating to the
control of the Company and the Directors
are not aware of any agreements between
holders of the Company’s shares that may
result in restrictions on voting rights.

Restrictions on transfer
of ordinary shares
The Articles do not contain any restrictions
on the transfer of ordinary shares in the
Company other than the usual restrictions
applicable where any amount is unpaid
on a share. All issued share capital of
the Company at the date of this Annual
Report is fully paid. Certain restrictions
are also imposed by laws and regulations
(such as insider trading and market abuse
requirements relating to close periods) and
requirements of the Listing Rules whereby
Directors and certain employees of the
Company require Board approval to deal
in the Company’s securities.

Each of the Executive Directors, and
the senior executives (each, a ‘Restricted
Shareholder’) at the time of listing agreed,
for a period of one year following Admission
on the terms and subject to the conditions
of the Underwriting Agreement, are not to
dispose of any of the ordinary shares they
held in the Company (the ‘Initial Lock-Up
Period’). This Initial Lock-Up Period
expired on 1 June 2018 and, for most of
the Restricted Shareholders, was and is
followed by three further lock-up periods
of 365 days, 720 and 1,095 days. Each of
these further lock-up periods commences
on the termination of the Initial Lock-Up
Period and cover in each occasion a further
25% of the relevant Restricted Shareholder’s
holding of ordinary shares. The final
lock-up period expires on 1 June 2021.

All of the above arrangements are subject
to certain customary exceptions.

Authority to purchase own shares
Subject to authorisation by shareholder
resolution, the Company may purchase
its own shares in accordance with the
Companies Act 2006. Any shares bought
back may be held as treasury shares or
cancelled immediately on completion
of the purchase.

At the 2020 AGM, the Company was
generally and unconditionally authorised by
its shareholders to purchase in the market
up to 10% of the ordinary shares of the
Company (30,000,000 ordinary shares).

As at 31 December 2020, and at the
date of this report, the full extent of this
authority remained in force and unused.
This authority is renewable annually, and
a special resolution will be proposed at
the 2021 AGM to request shareholders to
renew it. The Directors will only purchase
the Company’s shares in the market if
they believe it is in the best interests of
shareholders in general.

Amendment of the Articles
The Articles may only be amended by
a special resolution of the Company’s
shareholders in a general meeting, in
accordance with the Companies Act.

Transactions with related parties
The only subsisting material transactions
which the Company has entered into with
related parties are:

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
111

a. Relationship agreement and the controlling shareholder
The Relationship Agreement was entered into on 26 May 2017 and regulates the relationship between CHP Software and Consulting
Limited (the ‘Controlling Shareholder’) and the Company following listing. Subject to a certain minimum shareholding, the Relationship
Agreement details the rights the Controlling Shareholder has to representation on the Board and Nomination Committee and to
appoint observers to the Nomination Committee (if not represented on the Committee). The Controlling Shareholder also undertakes
not to operate, establish, own or acquire a competing business during the terms of the agreement. Any transactions between Alfa and
the Controlling Shareholder will be at arm’s length and on normal commercial terms.

The Relationship Agreement complies with the requirements of the LRs, including Listing Rules 9.2.2AR(2)(a), and Listing Rules 6.1.4DR.

In accordance with the requirements of Listing Rules 9.8.4(14), the Board confirms that the Company has complied with its obligations
under the Relationship Agreement, including in respect of the independence provisions and, so far as the Controlling Shareholder is
aware, the Controlling Shareholder has complied with the provisions of the Relationship Agreement (including the independence and
non-compete provisions set out therein), at all times since the Agreement was entered into.

Other related party transactions are detailed in note 31.3 to the consolidated financial statements.

Profits and dividends
The consolidated profit after tax for the year ended 31 December 2020 was £20.4m (FY19: £10.2m). The results are discussed in
greater detail in the Financial review on pages 38 to 41.

The Directors declared an interim special dividend of 15 pence per share in the 2020 financial year amounting to £44m (2019: nil).
The special dividend was paid on 6 November 2020. During the year, the trustee of the employee benefit trust which operate in
connection with the Company’s share plans waived their rights to receive dividends on any shares held by them. Details of the trust
can be found in note 12 of this report.

Subject to approval at the Annual General Meeting on 10 May 2021, a 2020 dividend of 1.0 pence per share will be paid on 2 July 2021
to holders on the register on 11 June 2021. The ordinary shares will be quoted ex-dividend on 10 June 2021.

Significant Shareholdings at 31 December 2020 and 12 March 2021 (being the latest practicable date of this report)
At the relevant dates, the Company has been notified pursuant to DTR5 or is otherwise aware of the following interests representing 3%
or more of the issued ordinary share capital of the Company:

Name of shareholder

No. of ordinary
shares at
31 December
2020

% of issued
share capital at
31 December
2020

No. of ordinary
shares at 12
March 2021

% of issued
share capital at
12 March 2021

CHP Software and Consulting Limited

197,645,649

65.88 197,645,649

Aberforth Partners

Aberdeen Standard Investments (Standard Life)

12,382,758

11,902,870

4.13

10,657,258

3.97

11,903,115

65.88

3.55

3.97

Nature of
holding

Direct

Indirect

Profit forecasts
During the year a number of regulatory announcements were made to update the market on expected trading performance and prospects
for the year. The following are extracts from announcements made during the year which included a profit forecast:

25 August 2020 – “Consensus market expectations are currently for revenue of £60m and EBIT of £4m. We now expect revenues to
exceed this by about 5% with the vast majority of this improvement also falling through to EBIT.”

29 September 2020 – “Both our work with existing clients and our late stage pipeline continues to develop and we are confident in
the outlook for full year 2020, with revenues expected to be about 5% ahead of expectations, flowing through to an increase in EBIT.”

29 October 2020 – “As a consequence of the continuing strong trading performance, the greater revenue visibility as a result of strong
contract win momentum, and the five year subscription extension referred to above, the Board now expects EBIT for the year ending
31 December 2020 to comfortably exceed FY19 actuals.”

17 December 2020 – “As a consequence of the continuing strong trading performance, the greater revenue visibility as a result of strong
contract win momentum, and the five year subscription extension referred to above, the Board now expects EBIT for the year ending
31 December 2020 to comfortably exceed FY19 actuals.”

The final results for the year of revenue of £78.9m and EBIT of £23.9m, exceeded all of these forecasts, due to the gradually improving
revenue projections as work became contracted as the immediate risks of the impacts from the pandemic receded, along with some
reduced costs from continuing reductions in travel during lockdown, and due to the finalisation of revenue recognition on a five year
contract extension.

Strategic reportGovernanceFinancial statementsOther informationDisclosure of information
to the auditor
Each of the Directors of the Company at
the date the Directors’ report is approved
confirms that:

• So far as the Director is aware, there is
no relevant audit information of which
the Company’s auditor is unaware; and
• He or she has taken all the steps that he
or she ought to have taken as a Director
in order to make himself or herself aware
of any relevant audit information and to
establish that the Group and Company’s
auditors are aware of that information.

This confirmation is given and should
be interpreted in accordance with the
provisions of s.418 of the Companies
Act 2006.

RSM UK Audit LLP, the Group’s auditor,
has indicated its willingness to continue
in office and, on the recommendation
of the Audit and Risk Committee and
in accordance with section 489 of the
Companies Act of 2006, a resolution to
reappoint it will be put to the 2021 AGM.

Board approval of the
Directors’ Report
The Directors’ Report was approved
by the Board on 22 March 2021
and signed on its behalf by:

Andrew Denton
Chief Executive Officer
22 March 2021

112

D I R E C T O R S ’ R E P O R T C O N T I N U E D

Compensation for loss of
office and change of control
There are no agreements between
the Company and its Directors or
Alfa team members providing for
additional compensation for loss of
office or employment (whether through
resignation, redundancy or otherwise)
that occurs because of a takeover bid.

The only significant agreement, to
which the Company is a party to that
take effect, alter or terminate upon
a change of control of the Company
following a takeover bid, and the effect
thereof, is the Relationship Agreement.

The Relationship Agreement with
the Controlling Shareholder contains
a provision under which it will terminate
upon the earlier of: (i) the Controlling
Shareholder and its associates ceasing to
have the entitlement to exercise or control
the exercise of 10% or more of the voting
rights in the Company; or (ii) the Company’s
ordinary shares ceasing to be admitted to
the listing on the Official List of the FCA.

Political donations
The Group made no political donations
and incurred no political expenditure
during the year (FY19: £nil). It remains the
Company’s policy not to make political
donations or to incur political expenditure.

At the 2020 AGM, the Directors were
generally and unconditionally authorised
by the Company’s shareholders to make
limited political donations up to £50,000,
in order to protect against any inadvertent
breaches of the relevant provisions of the
Companies Act 2006 which are very broad
in nature. The Board has no intention of
using this authority.

Interest capitalised in the period
No interest has been capitalised by Alfa
in the year ended 31 December 2020.

Stakeholder engagement
Details of how the Group has engaged with
its employees, suppliers, customers and
other principal stakeholders together with
details of the key decisions taken by the
Group during the year are disclosed on
pages 52 to 55.

Going concern
The Group continues to be cash generative
and the Directors believe that the Group
has a resilient business model. In making
their assessment of going concern, the
Directors have considered the current
financial projections and facilities available
to the Group as well as the principal risks
and uncertainties, including the impact of
Covid-19 as set out on page 15.

The going concern assessment also
includes downside stress testing in line
with FRC guidance which demonstrates
that even in the most extreme downside
conditions considered reasonably possible,
given the existing level of cash held, the
Group would continue to be able to meet
its obligations as they fall due, without the
need for substantive mitigating actions.

On this basis, whilst it is acknowledged
that there is considerable uncertainty
regarding the future impacts of Covid-19,
the Directors are satisfied that the Group
remains well placed to manage its business
risks successfully and therefore they have
a reasonable expectation that the Group
has adequate resources to continue in
operational existence for a period of
12 months from the date of approval
of the financial statements. Accordingly,
the financial statements continue to be
prepared on a going concern basis.

Viability statement
The viability statement containing a
broader assessment by the Board of the
Company’s ongoing viability, which also
includes consideration of the impact of
Covid-19, is set out in the Strategic
report on pages 50 to 51.

Corporate governance
statement
The Company’s statement on corporate
governance can be found on page 69 of the
Corporate governance report. The report
forms part of this Directors’ report and
is incorporated by cross reference.

Annual General Meeting
The Company’s Annual General
Meeting will be held at 3:00pm on
Monday, 10 May 2021 at Alfa’s head
office at Moor Place, 1 Fore Street,
London, EC2Y 9DT. The Notice of
Meeting setting out the resolutions to
be proposed at the 2021 AGM, together
with explanatory notes, will be sent to
shareholders as a separate document and
made available on the Company’s website
www.investors.alfasystems.com.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S
O F A L FA F I N A N C I A L S O F T WA R E H O L D I N G S P L C

113

Opinion
We have audited the financial statements of Alfa Financial Software Holdings plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2020 which comprise the Consolidated statement of profit or loss and comprehensive
income, Consolidated statement of financial position, Consolidated statement of changes in equity, Consolidated statement of
cash flows, Company statement of financial position, Company statement of changes in equity and notes to the financial statements,
including significant accounting policies. The financial reporting framework that has been applied in the preparation of the group
financial statements is applicable law and International Accounting Standards in conformity with the requirements of the Companies
Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. The financial reporting framework that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards FRS 102 “The Financial Reporting Standard applicable
in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).

In our opinion:

• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at

31 December 2020 and of the group’s profit for the year then ended;

• the group financial statements have been properly prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union;

• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally

Accepted Accounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards

the group financial statements, Article 4 of the IAS regulations.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to
adopt the going concern basis of accounting included reviewing and evaluating management’s three-year cash flow forecasts and the results
of scenario analysis. Disclosure of the group’s prospects and viability is disclosed in the Viability statement in the Strategic Report and based
on the results of the audit procedures outlined above, we have no observations to report.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.

We have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

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Summary of our audit approach

Key audit matters

Group
• Revenue recognition

Parent Company
• None

Materiality

Group
• Overall materiality: £893,000
• Performance materiality: £670,000

Parent Company
• Overall materiality: £882,000
• Performance materiality: £662,000
Our audit procedures covered 100% of revenue, 98% of total assets and 94% of profit before tax.

Scope

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the group and parent company
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Revenue recognition

Key audit matter
description

The 2020 group financial statements disclose the following types of revenue:

• Software implementation: £27.3m (2019: £26.1m)
• Ongoing development and services (“ODS”): £32.4m (2019: £23.4m)
• Maintenance: £19.2m (2019: £14.9m)

The Group’s operations include complex software implementation programmes and service activities.
The delivery of these contracts typically extends over more than one reporting period, and often the original
project plans are amended, as the implementation progresses. As such, in recognising revenue, management
has to apply a number of judgements to allocate the overall transaction price across the multiple performance
obligations that have been identified within these projects.

In addition, due to the structure of the Group’s licence and maintenance contractual arrangements, the Group
also receives one-off licence uplifts or maintenance / right to use termination payments which need to be
accounted for in accordance with IFRS 15 “Revenue from contracts with customers”.

We consider revenue recognition to be a key audit matter due to:

• The level of judgement involved in the identification of distinct performance obligations and subsequent

measurement of revenue and timing of recognition

• The potential risk of fraud in revenue recognition
• The allocation of audit resources and effort.

Further details on revenue recognition are included in note 1.5 “Accounting policies – Revenue recognition”,
note 2 “Critical accounting judgements, estimates and assumptions” and note 5 “Revenue from contracts
with customers”.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020115

How the matter
was addressed
in the audit

In response to this key audit matter, the audit procedures we performed included:

• Obtaining an understanding of the processes and controls around revenue recognition.
• Reviewing the group’s revenue recognition policy, including supporting accounting papers, to assess whether
performance obligations have been appropriately identified and revenue recognised in line with IFRS 15.

For software implementation revenue we:

• Assessed management’s analysis of the performance obligations within individual contracts and of how

the 5 steps in IFRS 15 should be applied.

• Audited the revenue recognition calculations for a sample of the most significant contracts to assess

whether the methodology applied was consistent with the group’s revenue recognition policy. This included
testing inputs in the calculations.

• Verified the explanations and data provided by management by holding discussions with project managers
regarding the key assumptions and judgements made, in particular around the estimates of the projected
costs to complete and the completeness of any contract arrangements, including any unusual terms and
contract modifications.

• Tested the completeness and accuracy of timesheet data as some performance obligations are recognised

based on days worked.

• Challenged management on the appropriateness of estimates made in the IFRS 15 calculations. This included
assessing the results of management’s sensitivity analysis over critical accounting estimates and performing
further analysis to assess the degree of sensitivity of estimates applied.

• Assessed the accounting for services scoped out of the implementation revenue calculations and treated
as part of ODS revenue and whether these are appropriately considered to be separate and distinct
performance obligations.

• Audited the disclosures in the financial statements and evaluated whether the policy for revenue

recognition is appropriately explained and critical judgements and key sources of estimation uncertainty
are appropriately disclosed.

We also performed substantive testing over a sample of revenue and maintenance revenue. This testing
included assessing whether contract modifications had been appropriately accounted for.

Specifically in respect of the “new one-off five-year contract with a customer” referred to in note 2, we:

• Assessed management’s analysis of the performance obligations and stand-alone selling-prices used
in determining the allocation of the contract consideration and subsequent recognition of revenue.

• Challenged management on the appropriateness of the key judgements and estimates made.
• Corroborated management’s calculations of stand alone selling prices and checked the accuracy

of the revenue recognition calculations.

• Involved a financial reporting specialist in our audit work on this area.
Disclosure of the impact of the key judgements and estimates applied in respect of revenue recognition are
disclosed in note 2 to the financial statements. Based on the results of the audit procedures outlined above,
we have no observations to report.

Key observations

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Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of
our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as
a whole, could reasonably influence the economic decisions of the users we take into account the qualitative nature and the size
of the misstatements. Based on our professional judgement, we determined materiality as follows:

Overall materiality

Basis for determining
overall materiality

Rationale for
benchmark applied

Group

£893,000

Parent company

£882,000

5% of profit before tax (adjusted to exclude
one-off licence revenue associated with a five-year
contract extension)

1% of net assets (capped at 99% of group
overall materiality)

As a listed entity, profit before taxation is considered
the most appropriate benchmark for users of the
financial statements.

Net assets is considered to be the most
appropriate benchmark for the parent
company as it is primarily a holding company.

Performance materiality

£670,000

£662,000

Basis for determining
performance materiality

Reporting of
misstatements to
the Audit Committee

75% of overall materiality

Misstatements in excess of £45,000 and
misstatements below that threshold that, in our
view, warranted reporting on qualitative grounds.

Misstatements in excess of £44,000 and
misstatements below that threshold that,
in our view, warranted reporting on
qualitative grounds.

An overview of the scope of our audit
The group consists of 9 components, located in the following countries;

• United Kingdom
• United States of America
• Germany
• France
• Australia
• New Zealand

Full scope audits were performed for 4 components, specific audit procedures for 3 components and analytical procedures at group
level for the remaining 2 components.

Full scope audit

Specific audit procedures

Total

Number of
components

Revenue

Total assets

73%

27%

100%

92%

98%

Profit
before tax

64%

30%

94%

Specific audit procedures were performed on components which are not financially significant by size but include a significant risk.
The specific audit procedures included testing of revenue and the associated balance sheet amounts as described in the key audit
matter section above.

All audit work was completed by the group audit team and no component auditors were used in our audit.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020117

Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable
legal requirements;

• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made
by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance
with applicable legal requirements; and

• information about the company’s corporate governance code and practices and about its administrative, management and

supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified material misstatements in:

• the Strategic Report or the Directors’ Report; or
• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received

from branches not visited by us; or

• the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement

with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance statement has not been prepared by the parent company.

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Corporate governance statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance
Statement specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

• Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identified as set out in the Viability Statement on pages 50 to 51;

• Directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why this period

is appropriate as set out in the Viability Statement on pages 50 to 51;

• Directors’ statement on fair, balanced and understandable as set out in the Audit Committee report on page 85;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out in the Principal risks

and uncertainties section in the Strategic Report on pages 44 to 49;

• The section of the annual report that describes the review of effectiveness of risk management and internal control systems as set

out in the Audit Committee report on pages 85 to 86; and

• The section describing the work of the audit committee as set out in the Audit Committee report on pages 82 to 87.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 108, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. In relation to laws and regulations, the objectives of our
audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect
on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify
instances of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to
respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit.

In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements
due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud
through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified
during the audit.

However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s
operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team:

• obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the group
and parent company operate in and how the group and parent company are complying with the legal and regulatory frameworks;

• inquired of management, and those charged with governance, about their own identification and assessment of the risks of

irregularities, including any known actual, suspected or alleged instances of fraud; and

• discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where

the financial statements may be susceptible to fraud.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020119

The most significant laws and regulations were determined as follows:

Legislation / Regulation

International Accounting
Standards in conformity
with the Companies
Act, FRS 102 and
Companies Act 2006

Tax compliance
regulations

Additional audit procedures performed by the audit engagement team included:
• Review of the financial statement disclosures and testing to supporting documentation;
• Completion of disclosure checklists to identify areas of non-compliance.

• Inspection of advice received from internal / external tax advisors
• Involvement of a tax specialist in the audit of tax
• Consideration of whether any matter identified during the audit required reporting to an

appropriate authority outside the entity.

The areas that we identified as being susceptible to material misstatement due to fraud were:

Risk

Audit procedures performed by the audit engagement team:

Revenue recognition

Management override
of controls

The audit procedures performed in relation to revenue recognition are documented
in the key audit matter section of our audit report.
• Testing the appropriateness of journal entries and other adjustments
• Assessing whether the judgements made in making accounting estimates are indicative

of a potential bias

• Evaluating the business rationale of any significant transactions that are unusual or outside

the normal course of business.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters which we are required to address
We were appointed by management in July 2020 to audit the financial statements of the Company for the period ending
31 December 2020. Following the recommendation of the Audit and Risk Committee, a resolution to appoint us for
subsequent years will be proposed to shareholders at the Company’s AGM to be held on 10 May 2021.

The period of total uninterrupted consecutive appointment is 1 year, covering the year ended 31 December 2020 to date.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and
we remain independent of the group and the parent company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Graham Ricketts
(Senior Statutory Auditor)

For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London, UK
22 March 2021

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C O N S O L I D AT E D S TAT E M E N T O F P R O F I T O R L O S S
A N D C O M P R E H E N S I V E I N C O M E

£’000s

Continuing operations

Revenue

Implementation and support expenses

Research and product development expenses

Sales, general and administrative expenses

Other operating income

Operating profit

Share of net loss of joint ventures

Profit before net finance costs and tax

Finance income

Finance expense

Profit before taxation

Taxation

Profit for the financial year

Other comprehensive income:

Exchange differences on translation of foreign operations

Other comprehensive income net of tax

Total comprehensive income for the year

Earnings per share (in pence) for profit attributable
to the ordinary equity holders of the Company

Basic

Diluted

Weighted average no. of shares (m) – basic

Weighted average no. of shares (m) – diluted

Note

2020

2019

78,870

64,480

(15,302)

(16,894)

(18,901)

(15,662)

(21,249)

(18,792)

528

577

23,946

13,709

(15)

–

23,931

13,709

109

(800)

23,240

(2,871)

20,369

143

(852)

13,000

(2,818)

10,182

(350)

20,434

9,832

6.93

6.79

293.8

300.1

3.50

3.41

290.6

298.8

The above consolidated statement of profit or loss and comprehensive income should be read in conjunction with the accompanying notes.

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£’000s

Assets

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Right-of-use assets

Deferred tax assets

Interests in joint ventures

Total non-current assets

Current assets

Trade receivables

Accrued income

Prepayments

Other receivables

Cash and cash equivalents

Total current assets

Total assets

Liabilities and equity

Current liabilities

Trade and other payables

Corporation tax

Lease liabilities

Contract liabilities – software implementation

Contract liabilities – deferred maintenance

Total current liabilities

Non-current liabilities

Lease liabilities

Provisions for other liabilities

Total non-current liabilities

Total liabilities

Capital and reserves

Share capital

Translation reserve

Retained earnings

Total equity

Total liabilities and equity

Note

2020

2019

23/32

24,737

2,153

885

2,255

1,166

14,841

16,402

1,794

394

596

–

44,804

45,156

5,812

4,992

2,065

799

37,020

50,688

95,492

8,120

1,266

1,701

1,947

5,047

4,050

7,214

1,613

1,020

58,839

72,736

117,892

5,884

1,355

1,672

4,581

4,060

18,081

17,552

15,790

1,392

17,182

35,263

300

59,838

60,229

95,492

17,330

667

17,997

35,549

300

82,017

82,343

117,892

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

The consolidated financial statements on pages 120 to 153 were approved and authorised for issue by the Board of Directors on
22 March 2021 and signed on its behalf.

Andrew Denton
Chief Executive Officer

Duncan Magrath
Chief Financial Officer

Alfa Financial Software Holdings PLC – Registered number 10713517

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£’000s

Balance as at 1 January 2019

Effect of initial application of IFRS 16

Deferred tax impact of initial application of IFRS 16

Adjusted balance at 1 January 2019

Profit for the financial year

Other comprehensive expense

Total comprehensive (expense)/income for the year

Equity-settled share-based payment schemes

Balance as at 31 December 2019

Profit for the financial year

Other comprehensive income

Total comprehensive income for the year

Equity-settled share-based payment schemes

Equity-settled share-based payment schemes –
deferred tax impact

Dividends

Note

Share capital

Translation
reserve

300

376

–

300

–

300

–

376

–

(350)

–

Equity
attributable to
owners of the
parent

72,915

Retained
earnings

72,239

(1,459)

419

71,199

10,182

–

10,182

636

82,017

20,369

–

20,369

1,321

419

71,875

10,182

(350)

9,832

636

82,343

20,369

20,434

1,321

369

(44,238)

Balance as at 31 December 2020

300

59,838

60,229

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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£’000s

Cash flows from operating activities

Profit before tax

Net finance costs

Share of net loss from joint venture

Operating profit

Adjustments:

Depreciation

Amortisation

Share-based payment charge

Loss on disposal of assets

Movement in provisions

Movement in contract liabilities

Movement in working capital:

Movement in trade and other receivables

Movement in trade and other payables (excluding contract liabilities)

Cash generated from operations

Interest element on lease payments

Other interest paid

Income taxes paid

Net cash generated from operating activities

Cash flows from investing activities

Purchases of property, plant and equipment

Purchases of computer software

Payments for internally developed software

Investment in joint venture

Loan to joint venture

Interest received

Net cash used in investing activities

Cash flows from financing activities

Dividends paid to Company shareholders

Principal element on lease payments

Cash used in financing activities

Net (decrease)/increase in cash

Note

2020

2019

23,240

13,000

691

709

–

23,946

13,709

2,253

842

1,515

532

2,388

428

724

–

515

(1,945)

3,110

646

2,249

2,532

(858)

30,099

22,548

(787)

(13)

(3,757)

25,542

(240)

(117)

(650)

(336)

(64)

109

(852)

–

(4,074)

17,622

(376)

(565)

(1,135)

–

143

(1,298)

(1,933)

(44,238)

–

6/16/17

6/15

10/24

(1,700)

(45,938)

(21,694)

58,839

(1,610)

14,079

44,922

(125)

(162)

37,020

58,839

Cash and cash equivalents at the beginning of the year

Effect of foreign exchange rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the year

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 2 0

Summary of significant accounting policies

1.
This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements.
These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for
the Group, consisting of Alfa Financial Software Holdings PLC (Alfa or the company), its subsidiaries and joint operation and are
presented to the nearest thousand.

The principal activity of the Group is to provide software solutions and consultancy services to the asset finance industry in the
United Kingdom, United States of America, Europe and Australasia.

1.1 Basis of preparation
Compliance with IFRS
The consolidated financial statements of the Group have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union.

Historical cost convention
The consolidated financial statements have been prepared under the historical cost convention, other than the revaluation of financial
assets and financial liabilities recorded at fair value through profit or loss.

Going concern
The financial statements are prepared on the going concern basis. The Group continues to be cash-generative and the Directors believe
that the Group has a resilient business model. The Group meets its day-to-day working capital requirements through its cash reserves
generated from operating activities. The Group’s forecasts and projections, taking account of reasonably possible changes in trading
performance including the possible impacts of Covid-19, show that the Group has sufficient cash reserves to continue to operate for
a period of not less than 12 months from the date of these financial statements.

The going concern assessment also includes downside stress testing in line with FRC guidance which demonstrates that even in the
most extreme downside conditions considered reasonably possible, given the existing level of cash held, the Group would continue
to be able to meet its obligations as they fall due, without the need for substantive mitigating actions.

On this basis, whilst it is acknowledged that there is continued uncertainty surrounding the future impacts of Covid-19, the Directors
consider it appropriate to continue to adopt the going concern basis of accounting in preparing the financial statements.

New and amended standards adopted by the Group
Effective for periods commencing on or after 1 January 2020:

• Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (issued on 26 September 2019)
• Amendments to IAS 1 and IAS 8: Definition of Material (issued on 31 October 2018)
• Amendments to References to the Conceptual Framework in IFRS Standards (issued on 29 March 2018)
• Amendments to IFRS 3 Business Combinations (issued on 22 October 2018)

The above standards have been endorsed by both the EU and the UK (from 1 January 2021). EU-IFRS at 31 December 2020 were
adopted for use within the UK by Regulation 4 of Statutory Instrument 2019/685. The adoption of the above standards had no
material impact.

New standards, amendments and interpretations not yet adopted
Effective for periods commencing on or after 1 June 2020:

• Amendments to IFRS 16 Leases: Covid 19-Related Rent Concessions

EU-IFRS at 31 December 2020 were adopted for use within the UK by Regulation 4 of Statutory Instrument 2019/685. The adoption

of this standard is not expected to have a material impact.

1.2 Group structure
Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

Unless otherwise stated, subsidiaries have share capital consisting solely of ordinary shares, and the proportion of ownership interests held
equals the voting rights held by the Group. The country of incorporation or registration is also each subsidiary’s principal place of business.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation. All subsidiaries have a 31 December year end.

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Joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject
to joint control; that is, when the relevant activities that significantly affect the investee’s returns require the unanimous consent of the
parties sharing control.

Joint control is the contractually agreed sharing of control of an arrangement, and exists only when decisions about the activities
that significantly affect the arrangement’s returns require the unanimous consent of the parties sharing control. Judgement
is required in determining this classification through an evaluation of the facts and circumstances arising from each individual
arrangement. Joint arrangements are classified as either joint operations or joint ventures based on the rights and obligations
of the parties to the arrangement. In joint operations, the parties have rights to the assets and obligations for the liabilities
relating to the arrangement, whereas in joint ventures, the parties have rights to the net assets of the arrangement.

Alfa only has one joint venture, namely Alfa iQ, which was formed in May 2020. The investment in the joint venture is accounted for using
the equity method. The Group’s share of the joint venture’s net profit/ (loss) is based on its most recent financial statement drawn up to the
Group’s balance sheet date. The total carrying value of investment in joint venture represents the cost of the investment, including loans
which form part of the net investment in the joint venture, plus the share of post-acquisition retained earnings and any other movements
in reserves less any impairment in the value of the investment.

The carrying values of joint ventures are reviewed on a regular basis and if there is objective evidence that an impairment in value has
occurred as a result of one or more events during the period, the investment is impaired. The Group’s share of the joint venture’s losses
in excess of its interest in that joint venture is not recognised to the extent that the Group has incurred legal or constructive obligations
or made payments on behalf of the joint venture. Unrealised gains arising from transactions with joint ventures are eliminated against
the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way, but only to the
extent that there is no evidence of impairment.

Loans to the joint venture are measured at fair value on initial recognition, and subsequently carried at amorised cost. Any surplus
between the nominal and fair value of the loan is recognised as an investment in the joint venture.

1.3 Segment reporting
Operating and reporting segments are reported in a manner consistent with the internal reporting provided to the Chief Operating
Decision Maker (CODM). The Group’s Chief Executive Officer (CEO), who is responsible for allocating resources and assessing
performance, has been identified as the CODM.

The CODM regularly reviews the Group’s operating results in order to assess performance and to allocate resources. The CODM
considers the business from a product perspective and, therefore, recognises one operating and reporting segment, being the sale
of software and related services. The Group is choosing to present revenue segmentation by type of project and a consolidated
Operating Profit measure, as presented to the CODM, along with the required entity wide disclosure.

The Group discloses revenue split by type of project being Software implementation, Ongoing development and services (ODS)
and Maintenance.

a. Software implementation project revenue – An implementation process contains three types of billing streams, being licence fee,
fees in relation to implementation tasks and fees for additional development. Software implementation projects can take from
a few months to several years depending on the complexity of the implementation and the size of customer.

The licence element is generally invoiced and collected at the beginning of the project and the licence amount is banded by the
number of geographies, modules taken by the customer and the number of contracts or agreements to be written and managed
on Alfa Systems.

Implementation and development fees are invoiced monthly in arrears based on a daily rate basis.

b. ODS revenue represents the ongoing development and services efforts which are either ad hoc projects with existing customers

or relate to development or services delivered after a new implementation. The services can be: pre-implementation work; support
following an implementation; further development for customer specific functionality; or change management assistance.
Such services are generally provided on a shorter contractual term.

c. Maintenance revenue is primarily invoiced periodically in advance. Maintenance amounts are linked to the volumes of contracts or
agreements being written through Alfa Systems and therefore increase if the customer’s portfolio increases. Certain of the Group’s
customers have maintenance invoiced on a monthly basis. Maintenance revenue also includes any revenue generated from the
Group’s Cloud Hosting activities which are invoiced on a monthly basis.

See note 1.5 for details of our revenue recognition accounting policy and note 2 for the critical accounting judgements and estimates
in relation to revenue recognition.

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1.4 Foreign currency translation
Functional currency
Items included in the consolidated financial statements of each of the Group’s subsidiaries are measured using their functional currency.
The functional currency of the parent and each subsidiary is the currency of the primary economic environment in which the entity
operates. See applicable exchange rates used in 2020 below:

USD

EUR

NZD

AUD

2020

2019

Closing

Average

Closing

Average

1.37

1.11

1.89

1.77

1.28

1.13

1.98

1.86

1.32

1.18

1.96

1.88

1.28

1.14

1.94

1.84

Presentation currency
The consolidated financial statements are presented in pounds sterling. Alfa’s functional and presentation currency is pounds sterling.

Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the date

of that consolidated statement of financial position;

• Income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange
rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
• All resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other
comprehensive income. When a foreign operation is sold the associated exchange differences are reclassified to profit or loss, as part
of the gain or loss on sale.

Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currencies using the exchange rates prevailing at the
dates of the transactions. Foreign exchange differences arising from the settlement of such transactions and from the translation at
the reporting date of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. See applicable
exchange rates used by the Group above.

1.5 Revenue recognition
The Group derives revenue from the following sources:

Software implementation revenue which includes software licences, software development and other software implementation services;

ii Ongoing development and support services; and

iii Software maintenance (help desk and other support services) and Cloud Hosting services.

The Group provides the right to use, software development services, core implementation services and ongoing support of its
product, Alfa Systems. The Group’s contractual arrangements contain multiple deliverables or services, such as the development
or customisation of the software to the customer’s requirements, implementation services such as migration of data and testing
and certain project management services.

Alfa assesses whether there are distinct performance obligations at the start of each contract and throughout the performance of
the implementation, development and services projects and maintenance period. These performance obligations are laid out below.
Any one contract may include a single performance obligation or a combination of those listed below:

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020127

a. Software implementation services
Where implementation services are considered to be distinct, i.e. when relatively straightforward, do not require additional development
services and could be performed by an external third party, the implementation services are accounted for as a separate performance
obligation from any development services. The transaction price is allocated to each performance obligation based on the stand-alone
selling prices, derived from day rates and is recognised over time based on the effort incurred, limited to the amount to which Alfa has
a right to payment.

Development services

b.
The second performance obligation is the granting of a right to use Alfa Systems, which includes the delivery of the related software
licence and any development efforts which change the underlying code. The total revenue attributable to this performance obligation
is estimated at the outset of the relevant software implementation project and recognised as the effort is expended, on a percentage
of completion basis, limited to the amount to which Alfa has the right to payment. A percentage-of-completion basis has been used
because customers obtain the ability to benefit from the product from the start of the implementation project, the development or
customisation of the asset has no alternative use to the Group; and the customer is entitled to the benefits of the efforts as at the
date the efforts are delivered, so recognition over time is appropriate.

Development services are valued using the residual value method as there are no stand-alone selling prices which are observable as
each project is customised.

c. Option over the right to use Alfa Systems
In the event that customers have to pay periodic maintenance fees in order to keep using Alfa Systems, a component of these future
maintenance fees is attributable to the right to use the software. In these circumstances the licence granted by Alfa is considered
to renew in future periods. There may be a material right in respect of discounts in future periods. In order to ascribe a value to this
option management initially determine the periodic value of the development services during the software implementation period
and estimate the remaining expected customer life.

The value of this option is built up from the start of the implementation project in line with the percentage of completion of
development efforts described in 1.5(b) above. Following the completion of the implementation project, the value of this option
is recognised evenly over the expected remaining customer life.

Periodic right to use Alfa Systems

d.
This represents the proportion of the annual maintenance fee which relates to the periodic option to renew the right to use Alfa
Systems. If there is the right of clawback of the annual right to use, such amounts are recognised throughout the annual period.
If there is no right of clawback, then the annual right to use amount is recognised in full when there is a right of collection.

e. Periodic maintenance amounts
This represents the stand-alone selling price of the ongoing support or maintenance of Alfa Systems which is recognised throughout
the period over which the services are delivered.

f. Subscription amounts
Certain of the Group’s implementation and service contracts include a subscription payment mechanism. This represents a monthly
fee charged to the customer covering the following performance obligations; the provision of monthly hosting services; the monthly
periodic right to use Alfa Systems and the provision of monthly maintenance services (when this becomes applicable to the customer).
The monthly payments are recognised as revenue in the period to which they relate. This reflects the underlying performance
obligations of the Group and termination rights of the customer.

One-off revenue amounts

g.
From time to time, the Group is entitled to receive one-off licence revenue from its customers as they increase the number of contracts
on their version of Alfa Systems. Additionally, there are times when catch-up periodic maintenance amounts are entitled to be received
by the Group, also as a result of the increased number of contracts. Generally this revenue is recognised at the point in time it is invoiced,
or becomes contractually payable, reflecting the fact that the Group has no remaining performance obligations to satisfy.

Variable consideration
Certain of the Group’s licence fees are receivable at the point where the number of contracts held on Alfa Systems exceeds a certain
contract band. If these licence revenues relate to customers who already have a live instance of the software, they are recognised at
the point in time in which the licence becomes receivable. When these software licences are associated with an implementation project
and the customisation of the software, management applies judgement as to when to include these amounts within the associated
percentage of completion calculation. In line with IFRS 15, these amounts are recognised as revenue at the point in time that it is highly
probable that the amounts would not be reversed.

Capitalised sales incentive costs
The Group incentivises its sale force for securing sales. In line with IFRS 15, these costs are capitalised and are amortised in line with the
percentage of completion of the software implementation project.

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1.6 Operating expenses
Operating expenses include items such as personnel costs (including training and recruitment), cost of software not capitalised,
research and development costs and other infrastructure expenses. These items have been grouped into the following categories
for disclosure purposes:

• Implementation and support expenses – Such expenses relate to the remuneration of personnel assigned to software implementation

support, in addition to project-related travel and accommodation expenses and an appropriate portion of relevant overheads.

• Research and product development expenses – The Group invests a substantial part of its time in research and product development
work in relation to the enhancement of its product platform and capabilities. Research and product development work is charged
to the customer where it is linked to specific customer projects, such as initial software implementations or customisation of the
software to the customer’s requirements. The Group’s research and product development costs include remuneration costs and
an appropriate portion of relevant overheads.

Internally generated research and product development costs only qualify for capitalisation if the Group can demonstrate all of the
criteria explained in note 1.14, where capitalised development costs are disclosed as internally generated intangible assets. If the
criteria are not met, such expenditure is recognised as an expense in the period in which it is incurred. The Group continues to assess
the eligibility of development costs for capitalisation on a project by project basis.
• Sales, general and administrative expenses include all the residual operating costs.

Income tax

1.7
Taxation expense for the year comprises current and deferred tax recognised in the reporting period. Tax is recognised in profit and
loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. Current or deferred
taxation assets and liabilities are not discounted.

Current tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the
countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the Group’s consolidated financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes
levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.

1.8 Leases
Alfa enters into lease contracts in respect of various properties and motor vehicles. These rental contracts are typically made for fixed
periods of two to 10 years, and sometimes have extension options. Lease terms are negotiated on an individual basis and contain a wide
range of different terms and conditions. In accordance with IFRS 16, leases are recognised as a right-of-use asset with a corresponding
liability, at the date at which the leased asset is available for use by Alfa. These assets and liabilities are initially measured on a present
value basis (as set out in more detail below), with each subsequent lease payment allocated between the liability and finance cost.
The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term
on a straight-line basis.

Alfa assesses whether a contract is, or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability, with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined
as leases with a lease term of 12 months, or fewer) and leases of low-value assets. For these leases, the Group recognises the lease
payments as an expense on a straight-line basis over the term of the lease, unless another systematic basis is more representative
of the time pattern in which economic benefits from the leased assets are consumed.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020129

Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease . If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

• Fixed lease payments (including in substance fixed payments), less any lease incentives;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• Penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented in separate lines, split between current and non-current liabilities, in the consolidated statement of
financial position. It is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group re-measures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

• The lease term has changed, or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is

re-measured by discounting the revised lease payments using a revised discount rate;

• The lease payments change due to changes in an index, or rate, or a change in expected payment under a guaranteed residual value.
In these cases, the lease liability is re-measured by discounting the revised lease payments, using the initial discount rate (unless the
lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and

• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is

re-measured by discounting the revised lease payments using a revised discount rate.

Right-of-use assets
The right-of-use assets comprise:

• The initial measurement of the corresponding lease liability;
• Lease payments made at, or before, the commencement day;
• Any initial direct costs; and
• Restoration cost.

The right-of-use assets are presented as a separate line in the consolidated statement of financial position.

The right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses (if applicable).
They are depreciated from the commencement date of the lease and over the shorter period of the lease term and useful life of the
underlying asset. If a lease transfers ownership of the underlying asset, or the cost of the right-of-use asset reflects an expectation
that the Group will exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
Currently, the Group does not have any leases that include a purchase option, or transfer ownership of the underlying asset.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located,
or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and
measured under IAS 37.

Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be
extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which
affects this assessment and that is within the control of the lessee. During the current financial period, there have been no changes
in such assessments.

Variable rents that do not depend on an index, or rate, are not included in the measurement of the lease liability and the right-of-use
asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments
occurs and are included as an expense in the consolidated statement of profit or loss and comprehensive income.

Impairment of assets

1.9
Goodwill is tested annually for impairment. The carrying amount is allocated to the cash-generating unit (CGU) that is expected to
benefit from investment and which represents the lowest level at which the goodwill is monitored for internal management purposes.
The carrying value of the CGU is then compared to the higher of its fair value less costs of disposal and its value in use. Any impairment
attributed to the goodwill is recognised immediately as an expense and is not subsequently reversed.

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1.
Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount might
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

1.10 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as short-term deposits with original maturities of three months or less.

1.11 Financial assets
Recognition and de-recognition
Financial assets are recognised in the statement of financial position when the Group becomes party to the contractual provision of
the instrument.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial
asset and substantially all the risks and rewards are transferred.

Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price
in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:

• Amortised cost;
• Fair value through profit or loss (FVTPL); and
• Fair value through other comprehensive income (FVOCI).

In the periods presented, the Group does not have any financial assets categorised as FVTPL or FVOCI. The classification is determined
by both:

• The entity’s business model for managing the financial asset; and
• The contractual cash flow characteristics of the financial asset.

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income
or other financial items, except for impairment of trade receivables which is presented within sales, general and administrative expenses.

Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

• They are held within a business model whose objective is to hold the financial assets and collect their contractual cash flows; and
• The contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the

principal amount outstanding.

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the
effect of discounting is immaterial. The Group’s trade and most other receivables (notes 20 and 21) and cash and cash equivalents
(note 22) fall into this category of financial instruments.

Impairment of financial assets
Under IFRS 9 the requirements are to use forward-looking information to recognise expected credit losses – the ‘expected credit loss
(ECL) model’. The Group considers a broad range of information when assessing credit risk and measuring expected credit losses,
including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future
cash flows of the instrument.

In applying this forward-looking approach, a distinction is made between:

• Financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk

(‘Stage 1’); and

• Financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’).
• ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020131

‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the
second and third categories.

1.12 Trade receivables
Trade receivables are amounts due from customers for licences sold or services performed in the ordinary course of business. They are
generally due for settlement within 30 days of the invoice date and are therefore all classified as current. Trade receivables are recognised
initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
An impairment loss is recognised when there is objective evidence that the Group will not be able to collect all amounts due according
to the original terms of the receivable. The Group considers information developed internally or obtained from external sources that
indicates that a debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the
Group) as an indication that a financial asset is not recoverable.

The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance.
To measure the expected credit losses, trade receivables have been grouped based on days overdue. The expected impairment loss is
recognised in the consolidated statement of profit or loss and comprehensive income within other expenses and subsequent recoveries
are credited to the same account previously used to recognise the impairment charge. During the current and prior period the result of
the above was immaterial and no impairment loss has been recognised.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The credit
qualities of these receivables are periodically assessed by reference to external credit ratings (if available) or to historical information
about their default rates. The Group does not hold any collateral as security.

As the total carrying amount of the current portion of the trade and other receivables is due within the next 12 months after the
reporting date, the impact of applying the effective interest method is not significant and, therefore, the carrying amount equals
the contractual amount or the fair value initially recognised.

1.13 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the item. Depreciation on assets is calculated using the straight-line method to allocate their
cost over their estimated useful lives, as follows:

Fixtures and fittings: 3-10 years

IT equipment: 2-5 years

Motor vehicles: 10 years

The assets’ residual values and useful lives are reviewed and adjusted if necessary at each reporting date. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Repairs and maintenance are charged to the consolidated statement of profit or loss and comprehensive income as incurred. Any gains
or losses on disposals are recognised within ‘Sales, general and administrative expenses’ in the consolidated statement of profit or loss
and comprehensive income unless otherwise specified.

Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount, which is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

1.14 Goodwill and other intangible assets
Goodwill
Goodwill arose on the acquisition of subsidiaries in 2012 as part of a group reorganisation and represents the excess of the consideration
transferred and the amount of any non-controlling interest in the investment over the fair value of the identifiable assets acquired
and liabilities and contingent liabilities assumed.

The Group assesses whether goodwill has suffered any impairment on an annual basis in accordance with the accounting policy
stated in note 1.9 above. There is one CGU, being the Group, as its geographical operations do not have separate or distinct cash
inflows. The recoverable amount of goodwill has been determined based on value-in-use calculations using cash flow projections
from financial budgets and forecasts.

Budgeted cash flow projections are based on the expectation of signing new customers in the Group’s sales pipeline as well as ongoing
implementation projects or ODS projects with existing customers. Budgeted gross margin is based on historical evidence and the
expectations of market development and efficiency leverage. Management believes that any reasonable change in any of the key
assumptions on which the recoverable amount is based would not cause the reported carrying amount to exceed the recoverable
amount of the CGU. The discount rate used reflects the Group’s pre-tax weighted average cost of capital (WACC), as adjusted
for region specific risks and other factors as required by IFRS.

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Intangible assets
Internally generated product development costs only qualify for capitalisation if the Group can demonstrate all of the following:

• The technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete the

intangible asset and use or sell it;

• Its ability to use or sell the intangible asset; including how the intangible asset will generate probable future economic benefits;
• The existence of a market or, if it is to be used internally, the usefulness of the intangible asset;
• The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible

asset; and

• Its ability to measure reliably the expenditure attributable to the intangible asset during development.

Generally, commercial viability of new products, modules or capabilities is not proven until all high-risk development issues have
been resolved through testing of the specific development. Development expenditure incurred on minor or major upgrades, or other
changes in software functionality, does not satisfy the criteria, where it is considered that the product is not substantially new in its
design or functional characteristics. Such expenditure is therefore recognised as an expense. See note 15 for disclosure of development
costs which have met the criteria of IAS 38. The Group continues to assess the eligibility of development costs for capitalisation on a
project–by-project basis.

Externally acquired intangible assets are initially recorded at historical cost. Historical cost includes expenditure that is directly
attributable to the acquisition of the item.

The Group amortises intangible assets with a limited useful life, using the straight-line method over the following periods:

Computer software: licence period or 10 years as applicable

Internally generated software: 3-5 years

Research and development which does not meet the criteria set out above is recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset in subsequent periods.

1.15 Trade and other payables
Trade payables are obligations to pay for goods or services which have been acquired in the ordinary course of business from suppliers.
Trade payables are recognised initially at fair value and subsequently measured at amortised costs using the effective interest rate
method. As the total carrying amount is due within the next 12 months from the reporting date, the impact of applying the effective
interest method is not significant and, therefore, the carrying amount equals the contractual amount or the fair value initially recognised.

The Group’s financial liabilities include trade and other payables and lease liabilities. Financial liabilities are initially measured at fair value,
and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method. All interest-related charges and,
if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired.

Trade and other payables and lease liabilities are classified as current liabilities if payment is due within one year or less. If not, they are
presented as non-current liabilities.

1.16 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that
an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. When the effect of the
discounting is material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation.

1.17 Employee benefits
The Group provides a range of benefits to employees, including paid holiday arrangements and defined contribution pension plans.

Short-term benefits
Short-term benefits, including health cover and other similar non-monetary benefits, are recognised as an expense in the period in
which the service is received.

Post-employment benefits
The Group operates various defined contribution plans for its employees. A defined contribution plan is a pension plan where the Group pays
fixed contributions into a separate independent entity. The Group has no legal or constructive obligation to pay further contributions if the
fund does not hold sufficient assets to pay all employees the benefits relating to the employee’s service in the current and prior periods.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020133

Employee share scheme expense
The Group makes equity-settled share-based payments to certain employees, which are measured at fair value at the date of grant and
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. For those share
schemes with market-related vesting conditions, the fair value is determined using the Monte Carlo model at the grant date. For share
options issued with EPS (non-market) performance vesting conditions, the fair value of the underlying vehicle is equal to the grant date
share price discounted by the expected dividend yield to reflect the lack of dividend accrual over the vesting period. For all other share
awards, those with pure employment conditions attached, the fair value is determined by reference to the market value of the shares
at the grant date. For all share schemes with non-market vesting conditions, the likelihood of vesting has been taken into account when
determining the relevant charge. Vesting assumptions are reviewed during each reporting period to ensure they reflect current expectations.

1.18 Equity
Ordinary shares
Ordinary shares are classified as equity. There are no restrictions on the distribution of capital and the repayment of capital.

Cumulative translation reserve
Exchange differences arising on translation of the foreign controlled entities are recognised in Other Comprehensive Income and
accumulated in a separate reserve within equity. The cumulative amount would be reclassified to profit or loss if the entity was disposed of.

1.19 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of Alfa by the weighted average number of
ordinary shares outstanding during the year.

Diluted earnings per share
Diluted earnings per share includes the ordinary shares which are held in an employee trust on behalf of employees. These shares are
treated as having a potentially dilutive effect as these shares have service and performance conditions attaching to them. Should the
service conditions not be met, the shares will be forfeited. The shares have no right to voting or to dividends while held in trust.

2. Critical accounting judgements, estimates and assumptions
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual
results. Management also needs to exercise judgement in applying the Group’s accounting policies.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more
likely to be materially adjusted in future periods due to estimates and assumptions turning out to be wrong. Detailed information
about each of these estimates and judgements is included in other notes, together with information about the basis of calculation
for each affected line item in the financial statements.

2.1 Critical judgements in applying the Group’s accounting policies
Revenue recognition – Assessing performance obligations
The Group is required to make an assessment as to whether the implementation process, which includes licence, implementation and
development revenue streams as well as any maintenance fees during this phase, forms one or a number of performance obligations.
In addition, the Group is also required to make an assessment as to whether each contract contains an expectation to deliver multiple
separate instances of the customised licence which may form separate groups of distinct performance obligations. In doing the above,
the Group assesses each software implementation contract as to whether the underlying software requires significant modification
or customisation by the Group in order to meet the customer’s requirements before Alfa Systems can be utilised by the customer.
Therefore judgement is required in determining which efforts relate to the implementation process and which efforts could be
determined to be development services which change or enhance the underlying code. In making this judgement, the Group assesses
the contractual terms and the original project plan for the implementation but also uses historical evidence of what constitutes core
implementation work.

Revenue recognition – One-off revenue contract
During the year the Group entered into a new one-off five-year contract with a customer to renew its software licence and maintenance
agreements. The Group has identified that this one-off contract contained two distinct separate performance obligations, being the
right for the customer to use the software and the ongoing maintenance and support. Both of these performance obligations relate
to the five-year period the contract covers. The key judgements applied by management are in the allocation of the five-year contract
value to each of the two performance obligations outlined above. A detailed assessment of the expected costs and margin of the
support and maintenance over the five-year period was carried out along with an assessment of a typical right to use licence payment.
Management then assessed the difference between the total contract value and fair value of the two performance obligations as
a premium. The premium has been allocated between the two performance obligations based on their relative proportion of the
stand-alone selling prices. As a result of the process outlined above, £5.6m was recognised upfront as the licence component, reflecting
the non-cancellable nature of the contract, with the balance of the contract for maintenance recognised over the life of the contract.

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2. Critical accounting judgements, estimates and assumptions continued
Internally generated software development – Assessing whether a project meets criteria of IAS 38
The Group is required to make an assessment of each ongoing project in order to determine at what stage a project meets the
criteria outlined in the Group’s accounting policies. Such assessment may, in certain circumstances, require significant judgement.
In making this judgement, the Group evaluates, amongst other factors, the stage at which technical feasibility has been achieved,
management’s intention to complete and use or sell the product, the likelihood of success, the availability of technical and financial
resources to complete the development phase and management’s ability to measure reliably the expenditure attributable to the
project. Research and product development expenditure incurred on minor or major upgrades, or other changes in software
functionality, does not satisfy the criteria where it is considered that the product is not substantially new in its design or functional
characteristics. Such expenditure is therefore recognised as an expense.

2.2 Key sources of estimation uncertainty
Revenue recognition – Assigning a stand-alone selling price for implementation services day rates
The Group assesses the value of the implementation services delivered by assessing the effective day rate for an implementation
contract, taking into account all revenue streams from implementation contracts against day rates of similar projects in the same
geographies. If the stand-alone selling price in relation to the implementation day rate increased by 5%, this would result in a
cumulative increase to revenue of £0.8m in 2020. As this increase in the implementation day rate estimate will not impact the
overall transaction price of the individual implementation contracts, it is expected that this increase of £0.8m would reverse
in future periods as the implementation contracts ongoing as at 31 December 2020 complete.

2.3 Other sources of estimation uncertainty
Revenue recognition – Percentage of completion estimate
The Group estimates the number of days required to complete the relevant software customisation effort at the outset of each
project and on an ongoing basis including at each consolidated statement of financial position date. Estimates of total project
days required for a relevant project are based on historical evidence of past implementations, knowledge of the customer’s
systems being replaced and scope of customisation being requested. The Group applies the percentage-of-completion method
when calculating development services revenue and updates estimates at each quarter end accordingly. At 31 December 2020,
if the Group’s estimates of development days to complete increased by 20% in relation to ongoing software implementation
projects, this would result in development services revenue decreasing by £0.1m in 2020.

3. Financial risk management
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes
the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative
information in respect of these risks is presented throughout these financial statements.

Area

Exposure arising from

Measurement

Management

Market risk – foreign exchange

Contracted revenue and costs
denominated in a currency
other than the entity’s
functional currency; and

Monetary assets and
liabilities denominated in
a currency other than the
entity’s functional currency.

Cash flow forecasting

Natural hedging from
localised cost base and
prompt conversion of
foreign currency cash
balances into pound sterling

Credit risk – cash balances

Cash and cash equivalents

Credit ratings

Credit risk – customer receivables Trade receivables and

Ageing analysis

accrued income

Credit ratings

Liquidity

Cash and cash equivalents

Cash flow forecasting

Diversification of
bank deposits

Credit checks and
contractual payment terms

Collection of up-front licence
fees, ageing analysis of
customer receivables

The Group’s overall risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group’s financial performance. The Group has used financial instruments to hedge certain risk exposures in the past.
Risk management is carried out by the finance function under policies approved by the Chief Financial Officer. The finance function
identifies, evaluates and mitigates financial risks when deemed necessary.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and maintain an optimal capital structure.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020135

3.1 Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risks arising from various currencies, primarily with respect
to those described below. Revenue is predominantly denominated in pounds sterling and US dollars. Operating costs are influenced
by the currencies of the countries where the Group’s subsidiaries are based and pounds sterling and the US dollars are the currencies
in which most operating costs are denominated.

The split by currency in relation to trade receivables is set out in note 20.

The Group’s exposure to foreign currency risk in relation to revenue is set out in note 5.

The Group has not entered into or utilised any form of hedging against foreign currency exposure during the current or prior period,
nor does the Group have any outstanding commercial foreign exchange contracts at 31 December 2020 or 31 December 2019.

A 10% movement in the USD GBP exchange rate in the year ended 31 December 2020 would have impacted revenue and operating
profit (excluding share-based payments) by 4% and 9% respectively.

3.2 Credit risk
a. Credit risk related to transactions with financial institutions
Credit risk with financial institutions is managed by the Group’s finance function in accordance with a Board approved policy.
Management is not aware of any significant risks associated with financial institutions as a result of cash and cash equivalents
deposits (including short-term investments) and financial derivative transactions.

b. Credit risks related to customer trade receivables
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, change
of strategy and default or delinquency in payments are considered indicators that a trade receivable could be impaired. Given the
complexity, the size and the length of certain software implementation of related projects, a delay in the settlement of an open
trade receivable does not necessarily constitute objective evidence that the trade receivable is impaired.

The Group’s customer base predominantly consists of large financial institutions that are financially sound. The responsibility for
customer credit risk management rests with management of the Group. Payment terms are set in accordance with practices in the
different geographies and end-markets served, typically being 30 days from the date of the invoice. Trade receivables are actively
monitored and managed. Collection risk is mitigated through the use of upfront payments of licences and maintenance. Historically,
there has been a de minimis level of customer default as a result of the long history of dealing with the Group’s customer base and
an active credit monitoring function. Where applicable, credit limits may be established based on internal or external rating criteria,
which take into account such factors as the financial condition of the customers, their credit history and the risk associated with their
industry segment.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables and accrued income. To measure the expected credit losses, trade receivables and accrued income have been
grouped based on shared credit risk characteristics and the days past due. The accrued income relates to unbilled work in progress and
has substantially the same risk characteristics as the trade receivables for the same types of contracts, other than where the Group has
collected upfront payments in the form of licence fees at the start of a software implementation contract. The Group has therefore
concluded that the expected loss rates for trade receivables are less than the loss rates for the accrued income.

The expected loss rates of trade receivables are based on the payment profiles of customer invoices over a period of 36 months before
31 December 2020 or 31 December 2019 respectively and the corresponding historical credit losses experienced within this period.
The historical loss rates would then be adjusted to reflect current or forward-looking information in relation to any macroeconomic
factors affecting the ability of the customers to settle the receivables.

The Group has not identified any current factors or forward-looking information which would be relevant to the historical loss rates
as all trade receivables have been collected in the past 24 months. Therefore on this basis, the loss allowance as at 31 December 2020
and 31 December 2019 was immaterial for both trade receivables and accrued income.

See note 20 – Trade receivables for the ageing of trade receivables and significant customer credit risk exposure.

3.3 Liquidity risk
The Group’s principal objective when managing capital is to safeguard the Group’s ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other stakeholders.

The capital structure of the Group consists of cash and cash equivalents (note 22) and equity attributable to equity holders of the parent.

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

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3. Financial risk management continued
The Group manages its exposure to liquidity risk through short and long-term forecasts and by seeking to align the maturity profiles
of its financial assets with its financial liabilities. The Group’s policy is to maintain an adequate level of liquidity to meet its liabilities
expected to be settled in the short or near term, under both normal and stressed conditions.

The following table details the remaining contractual maturity of the Group’s financial liabilities. The amounts disclosed in the table are
the contractual undiscounted cash flows.

£’000s

Trade and other payables

Lease liabilities – future lease payments

Carrying value

Less than 6
months

Between 6 to
12 months

Between 1 to 2
years

Between 2 to 5
years

More than 5
years

5,576

21,081

5,576

1,228

–

1,191

2,364

6,889

9,409

31 December 2020

£’000s

Trade and other payables

Lease liabilities – future lease payments

Carrying value

Less than 6
months

Between 6 to
12 months

Between 1 to 2
years

Between 2 to 5
years

More than 5
years

4,087

23,369

4,087

1,236

–

1,221

2,358

6,867

11,687

31 December 2019

4. Segments and principal activities
4.1 Revenue by type
The Group assesses revenue by type of project, being Software implementation, ODS and Maintenance, as summarised below:

£’000s

Software implementation

ODS

Maintenance

Total revenue

2020

27,328

32,363

19,179

78,870

2019

26,128

23,460

14,892

64,480

4.2 Operating profit
The following tables reconciles profit for the period attributable to equity holders to Operating Profit for the periods presented:

£’000s

Profit for the year

Adjusted for:

Net income from joint venture

Taxation

Finance income

Finance expense

Operating profit

4.3 Non-current assets geographical information
Non-current assets attributable to each geographical market:

£’000s

USA

Rest of World

Total non-current assets

Revenue by geographical market is contained within note 5.3.

2020

20,369

2019

10,182

2,871

(109)

800

–

2,818

(143)

852

23,946

13,709

2020

43,960

661

183

2019

44,276

220

44,804

44,560

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020
5. Revenue from contracts with customers
5.1 Customer concentration
Customers with revenue accounting for more than 10% of total revenue in the current year are as follows:

£’000s

Customer A

Customer B

Customer C

137

2020

12%

10%

2019

20%

See note 20 for outstanding trade receivables from those customers with revenue accounting for more than 10% of total revenue.

5.2 Timing of revenue
The Group derives revenue from the transfer of goods and services over time and at a point in time as follows:

2020
£’000s

At a point in time – time and materials

At a point in time – fixed price

Over time – time and materials

Over time – fixed price

Total revenue

2019
£’000s

At a point in time – time and materials

At a point in time – fixed price

Over time – time and materials

Over time – fixed price

Total revenue

Software
implementation

ODS Maintenance

–

24,450

420

5,688

–

617

Total
revenue

24,450

6,725

26,770

–

26,770

138

2,225

18,562

20,925

27,328

32,363

19,179

78,870

Software
implementation

ODS Maintenance

–

17,926

5,534

26,033

–

26,128

23,460

–

14,892

Total
revenue

17,926

5,534

26,033

14,987

64,480

All goods and services are sold directly to the customers.

5.3 Revenue geographical information
Revenue attributable to each geographical market based on where the licence is sold or the service provided is as follows:

£’000s

USA

Rest of EMEA

Rest of World

Total revenue

2020

29,176

25,780

21,308

2,606

2019

28,087

18,618

16,043

1,732

78,870

64,480

Following an evaluation of the Group’s geographical markets, and to reflect the way in which these are managed internally, the Rest of
Europe (excluding UK) segment has been updated to Rest of EMEA (excluding UK). As such, £3m of revenues generated from South
Africa have been reallocated from Rest of World to Rest of EMEA (excluding UK) for 2019.

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5. Revenue from contracts with customers continued
5.4 Revenue by currency
Revenue by contractual currency is as follows:

£’000s

GBP

USD

Euro

Other

Total revenue

5.5 Liabilities from contracts with customers

£’000s

Contract liabilities – software implementation

Contract liabilities – deferred maintenance

Total contract liabilities

2020

33,405

30,222

12,636

2,607

2019

21,644

29,398

9,429

4,009

78,870

64,480

2020

1,947

5,047

6,994

2019

4,581

4,060

8,641

Contract liabilities –software implementation
The majority of the Group’s software implementation customers are invoiced an upfront perpetual software licence at the commencement
of the implementation project. Customers generally require additional development efforts over the life of the implementation project
in order to customise the underlying code within Alfa Systems. Together these two elements form the Group’s development services
performance obligation. The fair value of this performance obligation is determined using the residual method as set out in note 1.5b
and this fair value is recognised as the development effort is expended, on a percentage of completion basis.

As such the software implementation contract liability balance as at 31 December 2020 represents any amounts received in advance
for the development service performance obligation being satisfied (including any unrecognised software licence amounts that were
received upfront). Additionally, where an option over the right to use Alfa Systems in the future exists, the value of this is also included
within the software implementation contract liability. This material right value is increased over the life of the implementation project
in line with the percentage of completion of the development efforts and then released on a straight line basis over the expected
remaining customer life post completion of the implementation project.

The software implementation contract liability balance will increase during the year as a result of:

• any new upfront software licence payments;
• any write back in previously recognised revenue as a result of project extensions or re-plans; and
• any additional material right balances that are added during the year.

The software implementation contract liability balance will decrease during the year as a results of:

• increasing percentage of completion of development efforts; and
• any release of material right balances following the completion of the implementation project.

Contract liabilities – deferred maintenance
The majority of the Group’s customers are invoiced annually in advance for the maintenance and support service provided by the
Group. As such, the deferred maintenance contract liability balance will increase during the year as a result of billing and invoices
becoming due, and will decrease as the Group satisfies its associated performance obligations. The deferred maintenance contract
liability balance as at 31 December 2020 therefore represents the Group’s unsatisfied period maintenance performance obligation
for which the revenue has been invoiced in advance.

5.6 Unsatisfied Performance Obligations
As outlined in section 2.1, during the current year, the Group entered into a new one-off five-year contract with a customer to renew its
software licence and maintenance agreements. The total amount of the contract price from this non-cancellable contract that relates
to the performance obligations that are unsatisfied at 31 December 2020 is £10.6m (2019: £ nil). We expect to recognise £2.2m in each
of the next four financial years and then the remaining £1.8m in the final financial year of the contract, being 2025.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020139

In addition, the Group has unsatisfied or partially satisfied performance obligations at 31 December 2020 that relate to the licence
customisation for those customers that have ongoing implementation projects, or implementation projects that commenced in
early 2021 and for which contracts were agreed prior to 31 December 2020. This performance obligation includes the delivery of
the related software licence and any development efforts which will change the underlying code. Linked to certain of these ongoing
and future projects, and also to certain implementation projects completed during 2020, the Group also has unsatisfied or partially
satisfied performance obligations at 31 December 2020 that relate to the option over the right to use Alfa Systems, and in particular
any material right in respect of discounts to be received by customer in future periods.

The above includes certain amounts recognised as contract liabilities or accrued income. The transaction price allocated to these unsatisfied
or partially satisfied performance obligations as at 31 December 2020 is £9.0m (2019: £10.0m). This amount is expected to be recognised
over the remaining life of the implementation projects, in respect of the licence and development efforts, and over the expected customer
life (following the completion of the implementation project) in respect of the option over the right to use Alfa Systems.

These unsatisfied or partially satisfied performance obligations are based on management’s best judgement and maybe impacted
in the future by a number of factors including:

• any possible contract modifications,
• currency fluctuations;
• external market factors; and
• changes to the overall forecast project plan including the overall life of the implementation project and any required development efforts.

It should be noted that these remaining performance obligations are not fully contracted as at 31 December 2020.

The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclosure information about the unsatisfied
performance obligations that have original expected durations of one year or less. This includes those performance obligations linked
to our ODS and maintenance revenue.

The Group also applies the practical expedient in paragraph B16 of IFRS 15 and does not disclose the amount of the transaction
price allocated to the unsatisfied contract performance obligations where consideration will be received directly corresponding to
the value of the performance obligation in the future and this consideration aligns to the value received to date for the corresponding
performance obligation. This includes those performance obligations linked to our software implementation services.

6. Operating profit
The following items have been included in arriving at operating profit:

£’000s

Personnel costs

Partner costs

Training and recruitment

Other personnel-related expenses

Advertising, sponsorship and marketing expenses

Depreciation and amortisation (note 15,16,17)

Property costs

Travel costs

IT expenses

Professional advisor costs

Insurance

Foreign currency differences

Employee share schemes (note 28)

Other

2020

2019

38,202

33,246

1,820

659

1,547

578

3,095

1,457

573

2,320

3,601

304

(514)

1,321

489

355

1,027

2,075

569

2,816

1,449

2,349

1,594

4,082

232

269

636

649

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6. Operating profit continued
A further split by nature is set out below:

£’000s

Personnel costs

Partner costs

Training and recruitment

Other personnel-related expenses

Travel costs

IT expenses

Overhead allocation including property costs

Implementation and support expenses

£’000s

Personnel costs

Training and recruitment

Other personnel-related expenses

IT expenses

Overhead allocation including property costs

Research and product development expenses

£’000s

Personnel costs

Training and recruitment

Other personnel-related expenses

Advertising, sponsorship and marketing expenses

Professional advisor costs

Insurance

Depreciation

Amortisation

Foreign currency differences

Employee share schemes

Other office costs

IT expenses

Overhead allocation including property costs

Sales, general and administrative expense

2020

2019

11,144

12,033

1,820

200

469

573

654

442

355

365

738

2,349

522

532

15,302

16,894

2020

2019

16,233

13,104

302

710

990

666

433

875

619

631

18,901

15,662

2020

10,825

157

368

578

3,601

304

2,253

842

(514)

1,321

453

676

385

2019

8,109

229

462

569

4,082

232

2,388

428

269

636

587

453

348

21,249

18,792

To better reflect the nature and function of certain expenses, management has made changes to the classification and allocation of
expense line items; comparative figures have also been reclassified accordingly. The main figures, which were previously reported in
2019, affected by this reclassification were: Salary cost; Partner costs; Secondment cost; and the Contractor costs. The impact on
the totals, previously reported in 2019, was a decrease of Implementation and support expenses of £1,209k with an increase in both
Research and product development cost and Sales, general and administrative expenses of £473k and £737k respectfully.
These changes have had no impact on the total expenses or the profit before tax that was disclosed in 2019.

Alfa Financial Software Holdings PLC Annual Report and Accounts 20207. Personnel related costs
£’000s

Wages, salaries and short-term benefits

Training and recruitment

Social security

Post-employment benefits

Other employee expenses

Employee share schemes

Total personnel related costs

141

2020

32,790

659

3,632

2,894

433

1,321

2019

28,072

1,027

3,517

2,676

1,054

636

41,729

36,983

To better reflect the nature of certain expenses, management has made changes to the classification and allocation of expense line
items; comparative figures have also been reclassified accordingly. The main figures, which had been previously reported in 2019,
affected by this reclassification were: wages, salaries and short-term benefits which increased by £0.4m, social security which
decreased by £0.5m, post-employee benefits which have increased by £0.1m and other personnel costs which have decreased by
£0.5m. Overall the total personnel related costs disclosed for 2019 have decreased by £0.5m due to partner costs being classified
separately, with the other movement reflecting reclassifications within the individual lines referred to above. These changes have
had no impact on the total expenses or the profit before tax that was disclosed in 2019.

Average monthly number of people employed (including Executive Directors)

USA

Rest of World

Total average monthly number of people employed

Average monthly number of people employed (including Executive Directors)

Software implementation

Research and product development

Sales, general and administrative

Total average monthly number of people employed

8. Key management
Key management compensation (including Directors):

£’000s

Wages, salaries and short-term benefits

Social security

Post-employment benefits

Share-based payments

2020

255

341

2020

102

156

341

2020

2,560

250

213

2019

236

313

2019

108

134

313

2019

2,428

223

Total key management compensation

3,100

2,731

Key management personnel consists of the Company Leadership Team and the directors. Directors’ remuneration is detailed in the
Remuneration report.

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9. Auditor’s remuneration
The Group obtained the following services from the Group’s auditor as detailed below:

£’000s

Deloitte LLP

Audit of the consolidated financial statements

Audit fees relating to prior year

Audit of subsidiaries

RSM UK Audit LLP

Audit of the consolidated financial statements

Audit of subsidiaries

Total audit fees

Audit-related assurance fees

Deloitte LLP

RSM UK Audit LLP

Total assurance fees

Non-audit services

Total audit and non-audit-related services

10. Finance income and expense
£’000s

Finance income

Interest income on cash or short-term bank deposits

£’000s

Finance expense

Interest on lease liability

Other interest expense

Total finance expense

11. Income tax expense
Analysis of charge for the year
£’000s

Current tax

Current tax on profit for the year

Adjustment in respect of prior years

Foreign tax on profit of subsidiaries for the current year

Current tax

Deferred tax

Origination and reversal of temporary differences

Adjustment in respect of prior years

Effect of changes in tax rates

Deferred tax

Total tax charge in the year

2020

2019

–

170

150

416

539

–

539

165

150

–

363

135

–

498

–

498

2020

2019

109

143

Note

2020

2019

(787)

(13)

(800)

(852)

–

(852)

2020

2019

4,528

(1,399)

586

3,715

(325)

(520)

(844)

2,871

2,159

(23)

851

2,987

(189)

–

(169)

2,818

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020143

The effective tax rate for the year is lower (2019: higher) than the standard rate of corporation tax in the UK. The effective tax rate for
the year ended 31 December 2020 was 12.4% (2019: 21.7%). The effective tax rate for the year benefits from favourable adjustments
in respect to prior years totalling £1,919k (2019: £23k), predominately due to UK R&D tax claims submitted in respect to 2018 and
2019. Excluding the impact of adjustments in respect to prior years, the effective tax rate for the year was 20.6% (2019: 21.9%).
The overall tax charge for the year is reconciled as follows:

Analysis of charge for the year
£’000s

Profit on ordinary activities before taxation

Profit on ordinary activities at the standard rate of corporation tax – 19%

Tax effects of:

Effect of different tax rates of subsidiaries operating in other jurisdictions

Expenses not deductible for tax purposes

Income not taxable for tax purposes

Share-based payments

Adjustment in respect of prior years

Impact of tax rate changes

Other

Total tax charge for the year

12. Earnings per share

Profit attributable to equity holders of Alfa (£’000s)

Weighted average number of shares outstanding during the year

Basic earnings per share (pence per share)

2020

23,240

4,415

181

–

(1,919)

119

2019

13,000

2,470

274

260

(1)

(152)

(23)

(30)

2,871

2,818

2020

20,369

2019

10,182

293,824,145 290,554,694

6.93

3.50

Weighted average number of shares outstanding including potentially dilutive shares

300,069,048 298,812,270

Diluted earnings per share (pence per share)

6.79

3.41

The weighted average number of ordinary shares in issue excludes 6,175,855 shares held by employee benefit trust. The diluted
number of ordinary shares outstanding, including share awards, is calculated on the assumption of conversion of all 6,139,161
potentially dilutive ordinary shares.

13. Financial assets and liabilities
£’000s

Finance assets

Financial assets at amortised cost:

Trade receivables

Other financial assets at amortised cost

Cash and cash equivalents

Finance liabilities

Financial liabilities at amortised cost:

Trade and other payables

Lease liabilities

Note

2020

2019

5,812

5,791

37,020

48,623

4,050

8,234

58,839

71,123

5,576

17,491

23,067

4,087

19,002

23,089

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14. Goodwill
£’000s

Cost

At 1 January

At 31 December

2020

2019

24,737

The recoverable amount of goodwill has been determined based on value-in-use calculations using cash flow projections from financial
budgets and forecasts for a five-year period using a discount rate of 11% (2019: 12%). Cash flows beyond these periods have been
extrapolated using a steady 2% (2019: 2%) average growth rate. This growth rate does not exceed the long-term average growth rate
for the markets in which the Group operates. Management believes that any reasonable change in any of the key assumptions on
which the recoverable amount is based would not cause the reported carrying amount to exceed the recoverable amount of the CGU.

15. Other intangible assets

£’000s

Cost

At 1 January 2019

Additions

At 31 December 2019

Amortisation

At 1 January 2019

Charge for the year

At 31 December 2019

Net book value

At 31 December 2019

Cost

At 1 January 2020

Additions

Disposals

At 31 December 2020

Amortisation

At 1 January 2020

Charge for the period

Disposals

At 31 December 2020

Net book value

At 31 December 2020

Computer
software

Internally
generated
software

1,049

345

1,394

253

275

528

407

1,135

1,542

–

153

Total

1,456

1,480

2,936

253

428

681

866

1,389

2,255

1,394

1,542

2,936

117

(56)

650

–

767

(56)

1,455

2,192

3,647

528

321

(29)

820

153

521

–

674

681

842

(29)

1,494

635

1,518

2,153

Significant movement in other intangible assets
During 2020, Alfa developed new internally generated software at a cost of £0.65m. This software will be amortised over three to five years.

The total research and product development expense for the period was £18.9m (2019: £15.2m), and there were £0.5m capitalised
personnel costs in the year (2019: £1.1m) and £0.15m of capitalised external agency costs (2019: £0.1m).

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020145

Fixtures and
fittings

IT equipment Motor vehicles

Total

1,147

2,859

372

(54)

1,218

3,177

522

107

654

564

1,218

(50)

(4)

2,030

565

(20)

2,575

602

3,177

202

(84)

(13)

1,202

3,282

654

114

(45)

(4)

719

2,575

394

(75)

(14)

2,880

483

402

–

(40)

–

(40)

–

4,046

376

4,435

2,591

673

3,269

1,166

4,435

240

(174)

(17)

4,484

3,269

508

(160)

(18)

3,599

885

16. Property, plant and equipment

£’000s

Cost

At 1 January 2019

Additions

Foreign exchange

At 31 December 2019

Depreciation

At 1 January 2019

Charge for the year

Foreign exchange

At 31 December 2019

Net book value

At 31 December 2019

Cost

At 1 January 2020

Additions

Disposals

Foreign exchange

At 31 December 2020

Depreciation

At 1 January 2020

Charge for the year

Disposals

Foreign exchange

At 31 December 2020

Net book value

At 31 December 2020

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17. Right-of-use assets
£’000s

Motor vehicles

Property

Total

Cost

At 1 January 2019

Additions

Foreign exchange

At 31 December 2019

Depreciation

At 1 January 2019

Charge for the year

At 31 December 2019

Net book value

At 31 December 2019

Cost

At 1 January 2020

Additions

Disposals

Foreign exchange

At 31 December 2020

Depreciation

At 1 January 2020

Charge for the year

Disposals

Foreign exchange

At 31 December 2020

Net book value

At 31 December 2020

128

(8)

212

–

17,898

17,990

132

(5)

17,905

18,117

–

1,648

–

1,715

145

16,257

16,402

212

127

(73)

273

(53)

–

111

17,905

18,117

(62)

(9)

218

(135)

(2)

17,925

18,198

1,648

(48)

(2)

1,715

1,745

(101)

(2)

3,246

3,357

162

14,679

14,841

The Group recognised the following amounts in the consolidated statement of profit or loss and comprehensive income in relation to
leases under IFRS 16:

£’000

Depreciation

Interest expense

Short-term lease expense

Low-value lease expense

2020

2019

(1,745)

(1,715)

(787)

(209)

–

(852)

(242)

–

Sub-lease rentals
One of the leased properties is sub-leased to tenants under long-term operating leases, with rentals payable quarterly. Minimum lease
payments receivable on these sub-leases of property are as follows:

£’000s

Within one year

Later than one year but not later than 5 years

Later than 5 years

Total sub-lease payments receivable

Income from sub-lease in the year

2020

427

–

472

528

2019

427

473

–

900

577

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020147

18. Deferred income tax
The provision for deferred tax consists of the following deferred tax assets/(liabilities) relating to accelerated capital allowances and
short-term timing differences in relation to unpaid pensions accruals and share-based payments.

£’000s

Balance as at 1 January

Adjustments in respect of prior period

Deferred income taxes recognised in the consolidated statement of profit or loss and comprehensive income

Share-based payments recognised in reserves

Foreign exchange movements

Balance as at 31 December

Consisting of:

Depreciation in excess of capital allowances

Other timing differences

Balance as at 31 December

2020

596

520

325

369

(16)

1,794

(88)

1,882

1,794

2019

419

169

–

596

359

237

596

Deferred income tax liabilities have not been recognised for the withholding tax and other taxes that would be payable on the
unremitted earnings of certain subsidiaries as the Group is able to control the timing of these temporary differences and it is probable
that they will not reverse in the foreseeable future. Unremitted earnings totalled £3.1m at 31 December 2020 (2019: £8.9m).

19. Interests in joint venture
At the beginning of May 2020, the Group formed Alfa iQ, a joint venture established to greatly enhance Alfa’s ability to develop artificial
intelligence solutions for the asset finance and auto finance industries. The joint venture was set up 51:49 between Alfa and Bitfount, a company
founded by Blaise Thomson. The financial and operating activities of the Group’s joint venture are jointly controlled by the participating
shareholders. The participating shareholders have rights to the net assets of the joint venture through their equity shareholdings.

The interest in the joint venture consists of part investment and part loan to joint venture accounted for as set out in note 1.2.

Investment
£’000s

Carrying amount as at 6 May 2020

Share of net loss from joint ventures

Carrying amount as at 31 December 2020

Loan to joint venture
£’000s

Carrying amount as at 6 May 2020

Interest

Carrying amount as at 31 December 2020

2020

336

(15)

321

2019

–

2020

2019

–

The total loss from interest in joint ventures is £15k (2019: £ nil) and the total interest in the joint venture is £394k (2019: £ nil).

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20. Trade receivables
£’000s

Trade receivables

Provision for impairment

Trade receivables – net

Ageing of trade receivables

Ageing of net trade receivables £’000s

Within agreed terms

Past due 1-30 days

Past due 31-90 days

Past due 91+ days

Trade receivables – net

2020

5,812

–

2019

4,050

–

5,812

4,050

2020

5,592

–

134

5,812

2019

3,398

243

152

257

4,050

The Group believes that the unimpaired amounts that are past due are fully recoverable as there are no indicators of future delinquency
or potential litigation.

Currency of trade receivables
£’000s

GBP

USD

Other

Trade receivables – net

2020

1,833

3,100

879

5,812

Trade receivables due from significant customers
Customers with revenue accounting for more than 10% of total revenue have outstanding trade receivables as follows:

£’000s

Customer A

Customer B

Customer C

2020

621

1,153

–

2019

1,319

2,073

658

4,050

2019

737

–

434

As at issuance of these financial statements, all amounts relating to customers accounting for more than 10% of total revenue had
been collected.

Impairment and risk exposure
Information about the impairment of trade receivables and the Group’s exposure to market risk (specifically foreign currency risk)
and credit risk can be found in note 3.

21. Other receivables held at amortised cost
£’000s

Accrued income

Prepayments

Other receivables

Total other receivables held at amortised cost

2020

4,992

2,065

799

7,856

2019

7,214

1,613

1,020

9,847

Accrued income represents fees earned but not yet invoiced at the reporting date which has no right of offset with contract liabilities
– deferred licence amounts.

Accrued income decreased by £2.2m. The current year balance represents unbilled work in progress in relation to our ODS customers
and £1.4m of one-off licence revenue items where there is contractual agreement to invoice in 2020.

Alfa Financial Software Holdings PLC Annual Report and Accounts 202022. Cash and cash equivalents
£’000s

Cash at bank and in hand

Cash and cash equivalents

Currency of cash and cash equivalents
£’000s

GBP

USD

AUD

Euro

Other

149

2019

58,839

2019

48,222

5,730

2,335

2,105

447

2020

37,020

2020

28,468

4,835

1,076

2,102

539

Cash and cash equivalents

37,020

58,839

23. Current and non-current liabilities
£’000s

Trade and other payables

Corporation tax

Contract liabilities – software implementation

Contract liabilities – deferred maintenance

Lease liabilities (note 24)

Provisions for other liabilities

Total current and non-current liabilities

Less non-current portion

Total current liabilities

2020

8,120

1,266

1,947

5,047

17,491

1,392

35,263

2019

5,884

1,355

4,581

4,060

19,002

667

35,549

(17,182)

(17,997)

18,081

17,552

Trade and other payables includes amounts relating to other tax and social security of £2.5m (2019: £1.8m).

24. Lease liabilities
The following table sets out the reconciliation of the lease liability from 1 January to the amount disclosed at 31 December:

£’000s

Lease liabilities recognised at 1 January

Additions

Disposals

Interest charge

Payments made on lease liability

Foreign exchange

At 31 December

Additions to lease liabilities include extensions to existing lease agreements.

2020

19,002

2019

20,480

203

(17)

787

132

–

852

(2,487)

(2,462)

–

17,491

19,002

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24. Lease liabilities continued
Below is the maturity analysis of the lease liabilities:

£’000s

Non-current

Current

Total lease liabilities

No later than one year

Between one year and 5 years

Later than 5 years

Total future lease payments

Total future interest payments

Total lease liabilities

2020

15,790

1,701

17,491

2,419

9,253

9,409

21,081

(3,590)

17,491

2019

17,330

1,672

19,002

2,456

9,226

11,687

23,369

(4,367)

19,002

The group’s net debt is made up of cash and cash equivalents and lease liabilities. The movement during the year in lease liabilities is set
out above. Movements in cash and cash equivalents are set out in the Cash flow statement.

25. Provision for other liabilities
£’000s

At 1 January 2019

Provided in the period

At 31 December 2019

Provided in the period

At 31 December 2020

152

515

667

725

1,392

Provisions for other liabilities comprise amounts for office dilapidations, employer taxes on share-based payments and legal costs.

26. Share capital

Issued and fully paid

Ordinary shares – 0.1 pence

Balance as at 31 December

2020

2019

£’000s

300,000,000

300

300,000,000

300

300,000,000

300

No additional shares have been issued or cancelled in the year ended 31 December 2020.

27. Translation reserve
£’000s

At 1 January 2020

Currency translation of subsidiaries

At 31 December 2020

2020

2019

376

(350)

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020151

28. Share awards
The LTIP awards granted prior to 2020 are conditional on employment only; the fair value of the awards issued under the 2018
and 2019 LTIP plans have been calculated using the grant date share price as a proxy for fair value of the option adjusted for any
dividends over the period. There are no market or non-market performance conditions attached to the option schemes and,
as such, no performance conditions are included in the fair value calculations.

On 4 June 2020 the Group awarded an LTIP conditional on performance conditions, 50% based on EPS performance (non-market
condition) and 50% on TSR (market condition) as well as three year employment fulfilment. For those share schemes with market-
related vesting conditions, the fair value is determined using the Monte Carlo model at the grant date. For share options issued with
EPS (non-market) performance vesting conditions, the fair value of the underlying option is equal to the grant date share price
discounted by the expected dividend yield to reflect the lack of dividend accrual over the vesting period. The following table lists
the inputs to the model used for the awards granted in the year ended 31 December 2020 based on information at the date of grant:

LTIP awards (granted in June)

Share price at date of grant

Award price

Volatility

Life of award

Risk free rate

Dividend yield

Fair value per award

TSR element

EPS element

74.3p

69.2%

3 years

0.02%

9.2%

40.1p

74.3p

–

3 years

–

9.2%

55.6p

All of these Company schemes, as well as any non-cyclical awards, are equity-settled by award of ordinary shares.

The total share-based payment charge relating to Alfa Financial Software Holdings PLC shares for the year is split as follows:

£’000s

Employee share schemes – value of services

Expense in relation to fair value of social security liability on employee share schemes

Total cost of employee share schemes

2020

1,321

194

1,515

2019

636

724

The following table summarised the movements in the number in nil cost share-based payment arrangements:

Outstanding at 1 January

Conditionally awarded in year

Exercised

Forfeited or expired in year

Outstanding at 31 December

Exercisable at the end of the year

2020

2019

6,482,950

13,361,253

2,358,444

1,205,036

(2,592,919)

(4,206,093)

(109,314)

(3,877,246)

6,139,161

6,482,950

–

The outstanding share schemes are made up of the following:

Grant date

June 2014/2015

June 2018

November 2019

June 2020

Expiry date

4 annual tranches from 1 June 2018

June 2021

November 2022

June 2023

Exercise price

Share options
31 December
2020

Share options
31 December
2019

1,197,503

3,803,689

1,378,178

1,474,225

1,205,036

2,358,444

–

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29. Unrecognised items
29.1 Contingencies and commitments
The Group has no capital commitments, no material contingent liabilities and no contingent assets.

29.2 Events occurring after the reporting period
There have been no reportable subsequent events.

30. Dividends
A special dividend of 15 pence per share was paid on 6 November 2020 amounting to £44.2m (2019: £ nil).

31. Related parties
31.1 Controlling shareholder
The ultimate parent undertaking is CHP Software and Consulting Limited (the ‘Parent’), which is the parent undertaking of the
smallest and largest group in relation to these consolidated financial statements. The ultimate controlling party is Andrew Page.

31.2 Basis of consolidation
The principal subsidiaries and joint ventures of the Group and the Group percentage of equity capital are set out below. All these are
consolidated within the Group’s financial statements.

Alfa Financial Software
Group Limited

Alfa Financial
Software Limited

Alfa Financial Software Inc

Alfa Financial Software
Australia Pty Limited

Alfa Financial Software
NZ Limited

Registered address and
country of incorporation

Moor Place, 1 Fore Street
Avenue, London, EC2Y
9DT, UK

350N Old Woodward
Avenue, Birmingham, MI
48009, USA

Principal
activity

Holding
company

Software
and services

Level 57 MLC Centre,
19-29 Martin Place, Sydney,
NSW 2000, Australia

Services

Level 1 Building B, 600
Great South Road,
Greenlane, Auckland 1051,
New Zealand

Services

Alfa Financial Software GmbH Bockenkheimer Landstraße

Alfa iQ

20, 60323 Frankfurt am
Main, Germany

Moor Place, 1 Fore Street
Avenue, London, EC2Y
9DT, UK

Software
and services

Alfa iQ was established in May 2020 – see note 19 for more detail.

Held by
Company
2020

100%

Held by
Group
2020

100%

Held by
Company
2019

100%

Held by
Group
2019

100%

–

100%

51%

–

100%

–

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020153

31.3 Transactions with related parties
Full details of the Directors’ compensation and interests are set out in the Directors’ Remuneration Report on pages 88.

See note 8 for further detail on monies paid to key management (including Directors).

Dividends to the amount of £29.6m were paid to the Parent (2019: £ nil).

Dividends of 15 pence per share were paid to all shareholders in 2020 (2019: £ nil). Directors and other key management received
dividends based on their beneficial interest in the shares of the Company. Directors’ beneficial interests in the shares of the company
are disclosed in the remuneration report on page 103.

The balances outstanding from the Parent at 31 December 2020 and 2019 were £ nil and £ nil respectively.

During the prior period, the Group made arms-length transactions with Classic Technology Limited, a company in which the Chairman
holds an interest. These transactions amounted in 2019 to £0.04m in relation to fees paid for rental of property. There were no similar
transactions undertaken during 2020.

During the period the Group invested £400,510 in Alfa IQ consisting of: a capital contribution of £335,972; and an interest-free loan
fair valued at £64,538. At 31 December the value of the investment is carried at £320,752 and the loan fair valued at £73,525.

There were no other outstanding receivable balances from related parties at the end of the reporting period.

32. Offsetting assets and liabilities
Assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position where Alfa
currently has a legally enforceable right to offset the recognised amounts, and there is an intention to realise the asset and settle
the liability simultaneously.

The following table presents the recognised assets and liabilities that are offset as at 31 December 2020 and 31 December 2019
in the consolidated statement of financial position.

31 December 2020
£000’s

Accrued income

Contract liabilities – software implementation

31 December 2019
£000’s

Accrued income

Contract liabilities – software implementation

Gross
amounts

12,548

Amounts
offset

Net amounts
presented

(7,556)

4,992

(9,503)

7,556

(1,947)

Gross
amounts

15,763

(13,130)

Amounts
offset

Net amounts
presented

(8,549)

8,549

7,214

(4,581)

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C O M P A N Y S TAT E M E N T O F F I N A N C I A L P O S I T I O N

£’000s

Assets

Non-current assets

Investment in subsidiary companies

Total non-current assets

Current assets

Other receivables

Cash and cash equivalents

Total current assets

Total assets

Liabilities and equity

Current liabilities

Amounts owed to subsidiaries

Other payables

Accruals

Total current liabilities

Non-current liabilities

Amounts owed to subsidiaries

Provision

Total non-current liabilities

Total liabilities

Capital and reserves

Ordinary shares

Retained earnings

Total equity

Total liabilities and equity

Note

2020

2019

348,693

347,436

348,693

347,436

253

340

287

106

393

349,033

347,829

222

362

448

3,448

168

661

1,032

4,277

–

1,045

32,516

–

32,516

36,793

300

347,688

310,736

347,988

311,036

349,033

347,829

Retained earnings includes a profit of £79.8m for the 2020 financial year (31 December 2019: loss of £2.8m). See the statement
of changes in equity on the next page for further detail.

The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own
profit and loss account.

The above Company statement of financial position should be read in conjunction with the accompanying notes.

The Company financial statements on pages 154 to 159 were approved and authorised for issue by the Board of Directors on
22 March 2021 and signed on its behalf.

Andrew Denton
Chief Executive Officer

Alfa Financial Software Holdings PLC
Registered number 10713517

Duncan Magrath
Chief Financial Officer

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020

C O M P A N Y S TAT E M E N T O F C H A N G E S I N E Q U I T Y

155

£’000s

Balance as at 1 January 2019

Total comprehensive loss for the period

Employee share schemes – value of employee services

Balance as at 31 December 2019

Total comprehensive profit for the period

Employee share schemes – value of employee services

Dividends

Balance as at 31 December 2020

Called-up share
capital

Note

Retained
earnings

Total equity

300

312,864

313,164

–

(2,764)

636

300

310,736

311,036

–

79,837

1,353

(44,238)

300

347,688

347,988

As at 31 December 2020 £2.3m (31 December 2019: £0.9m) of the retained earnings balance relates to reserves held to settle the Alfa
employee share schemes, and does not qualify as distributable reserves.

The above Company statement of changes in equity should be read in conjunction with the accompanying notes.

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N O T E S T O T H E C O M P A N Y F I N A N C I A L S TAT E M E N T S
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Summary of significant accounting policies

1.
Alfa Financial Software Holdings PLC is a public company limited by shares and is incorporated and domiciled in England.
These financial statements are the separate financial statements for the Company.

The registered office is Moor Place, 1 Fore Street Avenue, London, EC2Y 9DT, United Kingdom. The registered no. of Alfa is 10713517.

The principal activity of the Company is as a holding company.

1.1 Statement of compliance and basis of preparation
The financial statements of Alfa Financial Software Holdings PLC have been prepared in compliance with Financial Reporting Standard 102,
the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland (‘FRS 102’) and the Companies Act 2006.

The principal accounting policies applied in the preparation of these financial statements are set out above. These policies have been
consistently applied to the years presented, unless otherwise stated.

These financial statements have been prepared on a going concern basis, under the historical cost convention. The Directors have used the
going concern principle on the basis that the current profitable financial projections of the Company and its subsidiaries indicate they will
continue in operation for the foreseeable future. As described in note 1.1 to the Consolidated financial statements, this assessment includes
downside and reverse stress testing and consideration of the continued uncertainty surrounding the future impacts of Covid-19.

The Company financial statements have been prepared in pounds sterling which is the functional and presentational currency of the
Company and have been presented in £’000s.

As permitted by FRS 102 the Company has taken advantage of the disclosure exemptions available under that standard in relation to financial
instruments, presentation of a Cash Flow Statement, share-based payments, the aggregate remuneration of key management personnel and
related party transactions with other wholly-owned members of the Group.

The parent company meets the definition of a qualifying entity under FRS 102. Where required, equivalent disclosures are given in the Group
accounts of Alfa Financial Software Holdings PLC.

The profit for the financial period to 31 December 2020 was £79.8m (2019: loss of £2.8m).

Investments in subsidiaries

1.2
Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Unless otherwise stated, subsidiaries have share capital consisting solely of ordinary shares, and the proportion of ownership interests
held equals the voting rights held by the Company. The country of incorporation or registration is also each subsidiary’s principal place
of business.

Investments in subsidiary undertakings are stated at cost, including those costs associated with the acquisitions, less provision for
any impairment in value. Where events or changes in circumstances, including an adverse movement in the share price, indicate that
the carrying amount of an investment may not be recoverable, an impairment review is performed. An impairment write-down is
recognised to the extent that the carrying amount of the asset exceeds the higher of the fair value less cost to sell and value in use.

Any subsidiary undertakings sold or acquired during the year are included up to, or from, the dates of change of control. Where control
of a subsidiary is lost it is recognised in the profit or loss.

Amounts subsidiaries are unsecured, interest-free and repayable on demand. The carrying amounts of such payables are considered
to be the same as their fair values due to their short-term nature.

1.3 Financial assets
Basic financial assets, including trade and other receivables, cash and bank balances and other receivables, are initially recognised
at transaction price, unless the arrangement constitutes a financing transaction.

At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment.
If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated
cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020157

1.4 Financial liabilities
Basic financial liabilities, including trade and other payables and trading balances and loans from subsidiaries are initially recognised
at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present
value of the future receipts discounted at a market rate of interest. The Company derecognises financial liabilities when, and only when,
the Company’s obligations are discharged, cancelled or expired.

Other payables are initially recorded at fair value and subsequently measured at amortised cost. As the total carrying amount is due
within the next 12 months from the balance sheet date, the impact of applying the effective interest method is not significant and
therefore the carrying amount equals to the contractual amount or the fair value initially recognised.

Payables are classified as current liabilities if receipt or payment is due within one year or less.

1.5 Equity
Ordinary shares
Ordinary shares are classified as equity. There are no restrictions on the distribution of capital and the repayment of capital.

1.6 Employee share schemes
Grants made to subsidiary employees will not result in a charge recognised in the income statement, any charges for share-based
payments are recognised as an increase in the cost of investment in subsidiaries. For full details of the Group’s share-based payments,
refer to note 28 to the consolidated financial statements.

1.7 Dividends
Dividends are recognised through equity when approved by Alfa’s shareholders or on payment, whichever is earlier.

2. Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition,
seldom equal the related actual results. There were no critical accounting judgements that would have a significant effect on the
amounts recognised in the parent company financial statements or key sources of estimation uncertainty at the reporting date
that would have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year.

3. Financial risk management
The Company’s exposure to financial risks is managed as part of the Group’s financial risk management. Full details about the
Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance are given in note 3
to the consolidated financial statements.

Investments in subsidiaries

4.
£’000s

Cost

As at 1 January

Capital contributions to subsidiaries

Impairment charge

As at 31 December

2020

2019

347,436

346,800

1,257

–

636

–

348,693

347,436

The carrying amount of the investment is £348.7m at 31 December 2020 (2019: £347.4m). The recoverable amount of the investment
was determined based on value-in-use calculations using cash flow projections of the Company and its subsidiaries from financial
budgets and forecasts for a five-year period using a discount rate of 11% (2019: 12%). Cash flows beyond these periods have been
extrapolated using a steady 2% (2019: 2%) average growth rate. This growth rate does not exceed the long-term average growth
rate for the markets in which the Company and its subsidiaries operate. In addition, the market capitalisation of the Company as
at 31 December 2020 was £396.0m. As the recoverable amount, and the market capitalisation of the Company, are in excess of
the carrying amount of the investment, no impairment charge has been recognised during the current financial year.

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5. Other receivables
At 31 December 2020, other receivables relate to prepayments of £210k (2019: £74k) and VAT receivables of £43k (2019: £113k).

6. Cash and cash equivalents
£’000s

Cash and cash equivalents

7. Amounts owed to subsidiaries
£’000s

Amounts owed to subsidiaries – current

Amounts owed to subsidiaries – non-current

Total amounts owed to subsidiaries

2020

222

–

222

2019

106

2019

3,448

32,516

35,964

Current amounts owed to subsidiaries of £0.2m relates to operating expenses owed (2019: £3.5m). The prior year non-current
amounts reflected a loan of £29.9m principal that was repayable in 10 years, and accrued interest, accruing at 2% over the applicable
base rate. This loan and all accrued interest was repaid in 2020.

8. Other payables and provision for other liabilities
Other payables relate to accruals of social security and other taxes of £59k (2019: £53k), trade creditors of £78k (2019: £115k)
and salary costs of £225k (2019:£ nil).

Long-term provision relate to the employer national insurance contribution of £13k of the 2020 share grant expense that relates
to the employees of the Company (2019: £ nil).

9. Called-up share capital
Each ordinary share has a par value of 0.1 pence. All shares are fully paid and have equal voting rights.

Issued and full paid

At 31 December 2020

At 31 December 2019

Shares-
ordinary

300,000,000

£’000s

300

10. Employee share schemes
Under the rules of the Company’s LTIP plans, on 31 May 2018, 1 November 2019 and on 2 June 2020, selected employees of
the Company’s subsidiary were granted awards in the form of nil cost options over ordinary shares in Alfa. Refer to note 28 of the
consolidated accounts for more detail on these grants. The cost of the share-based remuneration is passed to the relevant subsidiary.

11. Dividends
A special dividend of 15p per share was paid on 6 November 2020, amounting to £44.2m (2019: £ nil).

12. Directors’ remuneration
The Company has no employees other than the Directors. Full details of the Directors’ compensation and interests are set out in the
Directors’ Remuneration Report on pages 100 to 107.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020159

13. Related party and ultimate controlling party
The Company has taken advantage of the exemption under FRS 102:33.1A from disclosing transactions with other members of the Group.

The immediate and ultimate parent undertaking is CHP Software and Consulting Limited, which is the parent undertaking of the
smallest and largest group to consolidate these financial statements. The registered office of the immediate and ultimate parent
undertaking is Moor Place, 1 Fore Street Avenue, London EC2Y 9DT and copies of the financial statements of CHP Software and
Consulting Limited can be obtained from this address. The ultimate controlling party is Andrew Page.

See a full listing of Company’s subsidiaries and joint venture in note 31.2 of the Group accounts.

14. Subsequent events
There have been no reportable subsequent events.

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G L O S S A R Y O F T E R M S

Adjusted EBIT: Adjusted EBIT is
defined as profit from continuing
operations, before interest and income
taxes, adjusted for capitalised costs
relating to internally generated assets
and the relevant amortisation costs
on associated internally generated
assets. Now no longer used.

Adjusted EBIT margin: Adjusted EBIT
margin is defined as profit from continuing
operations, before interest and income
taxes, adjusted for capitalised costs
relating to internally generated assets
and the relevant amortisation costs on
associated internally generated assets
as a proportion of revenue. Now no
longer used.

AI: Artificial Intelligence.

CLT: Company Leadership Team.

CODM: Chief Operating Decision Maker.

COO: Chief Operating Officer.

CSR: Corporate Social Responsibility.

DBSP: Deferred Bonus Share Plan.

Operating free cash flow conversion:
Operating free cash flow is calculated
as cash from operations, less capital
expenditures, less the principal element
of lease payments in respect of IFRS 16
(applied for the first time in the year ended
31 December 2019). Operating free cash
flow conversion represents Operating free
cash flow generated as a proportion of
Operating profit.

Directors: The Directors of the Company
whose names are set out on pages 66 to 67.

Disclosure and Transparency Rules: The
Disclosure and Transparency Rules made
under Part VI of the Financial Services
and Markets Act 2000 (as amended).

PDMR: Person Discharging Managerial
Responsibilities.

PDP: Performance Development Plan.

RFI: Request for information.

EMEA: Europe, the Middle East and Africa.

R&PD: Research and product development.

API: Application Programming Interface.

ESG: Environmental, Social and Governance.

SG&A: Sales, general and administrative
expenses.

AGM: Annual General Meeting.

Alfa: The Group or Alfa Financial
Software Holdings PLC and its
subsidiary undertakings (as defined
by the Companies Act 2006).

EPS: Earnings per share.

EU: European Union.

SI: Systems integrator.

EURIBOR: the Euro Interbank Offer Rate.

FCA: Financial Conduct Authority

SONIA: Sterling Overnight Index Average.
The effective overnight interest rate paid
by banks for unsecured transactions in the
British sterling market.

APM: Alternative Performance Measure.

FCF: Free cash flow.

STFR: Single total figure of remuneration.

Articles: The Articles of Association
of the Company.

FRC: The Financial Reporting Council.

TCV: Total contract value.

The Code: The UK Corporate Governance
Code published by the FRC in July 2018.

TSR: Total shareholder return.

UAT: User acceptance testing UI:
User interface.

VAT: UK value added taxation.

XaaS: Everything as a service.

Banks: Customers classified as banking
institutions are finance entities associated
with regulated banking groups.

FVOCI: Fair value through other
comprehensive income.

FTE: Full time equivalent.

Basic earnings per share: Calculated by
dividing the profit attributable to equity
holders of Alfa by the weighted average
number of ordinary shares outstanding
during the year.

Board: The Board of Directors of Alfa
Financial Software Holdings PLC.

FVTPL: Fair value through profit or loss.

GHG: Greenhouse gases.

HMRC: Her Majesty’s Revenue & Customs.

KPI: Key performance indicator.

IP: Intellectual property.

Companies Act: The Companies Act 2006
(as amended).

IRT: Incident Response Team.

CEO: Chief Executive Officer.

CFO: Chief Financial Officer.

CGU: Cash-generating unit.

I&S: Implementation and Support
(“I&S”) expense.

LIBOR: London Inter-bank Offered Rate.

Company: Alfa Financial Software
Holdings PLC, a company incorporated in
England and Wales with registered number
10713517 whose registered office is at
Moor Place, 1 Fore Street Avenue, London,
EC2Y 9DT, United Kingdom.

LTIP: Long-Term Incentive Plan.

ML: Machine Learning.

OEMs: Original equipment and
automotive manufacturers.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2020Strategic report

Governance

Financial statements

Other information

S H A R E H O L D E R I N F O R M AT I O N

Alfa Financial Software Holdings PLC
Registered Office
Moor Place
1 Fore Street Avenue
London
EC2Y 9DT

www.alfasystems.com

T+44 (0)20 7588 1800
Registered Number: 10713517
Stock code: ALFA

Investor relations
ir@alfasystems.com

Media relations
Tulchan Communications LLP

Auditor
RSM UK Audit LLP

Brokers
Barclays Bank plc
Investec Bank plc

Corporate lawyer
White & Case LLP

Remuneration advisors
Ellason LLP
Tapestry Global Compliance LLP

Registrar/shareholder queries
Equiniti Limited
Aspect House,
Spencer Road,
Lancing, West Sussex
BN99 6DA

Telephone 0345 609 0810 and outside the UK +44
(0)121 415 7071

Online: help.shareview.co.uk (from here, you will be
able to securely email Equiniti with your enquiry.)

Consultancy, design and production
www.luminous.co.uk

Design and production
www.luminous.co.uk

Moor Place
1 Fore Street Avenue
London EC2Y 9DT
UK

+44 (0)20 7588 1800