Alfa ARR and contract value rise 17% in strong first half

Alfa Financial Software has reported 17% growth in both annual recurring revenue (ARR) and total contract value (TCV) during the first half of 2026, as the asset finance software provider continued to expand its subscription business and invest in AI, cloud and new product capabilities.

ARR increased to £48.5 million, from £41.6 million a year earlier, while TCV reached £247.0 million, up from £210.7 million. Revenue for the six months to 30 June increased 4% to £65.1 million, or 5% at constant currency, with subscription revenues rising 14% to £24.1 million.

Delivery revenues increased 5% to £32.4 million, while software engineering revenues fell 17% to £8.6 million against what Alfa described as a particularly strong first half in 2025.

The company said its growing recurring revenue base and pipeline visibility underpin confidence in its future prospects, with £100.6 million of TCV expected to convert into revenue over the next 12 months, up 12% year-on-year.

Subscription TCV increased 22% to £176.0 million. Over the past four years, this figure has almost doubled from £89.2 million at the end of June 2022, representing compound annual growth of 19%. Alfa said this gives it confidence of continuing to achieve mid-to-high teens compound annual growth in subscription revenues over the short-to-medium term.

Operating profit declined 15% to £18.4 million from £21.6 million, reflecting £1.6 million of severance costs, the impact of foreign exchange hedges and lower software engineering revenues. Excluding severance costs and FX hedges, operating profit increased 2% to £20.3 million.

Profit before tax was £18.2 million, down from £21.5 million, while profit for the period decreased to £13.5 million from £15.9 million.

Alfa finished the half with £22.2 million of cash and no bank debt. Cash generated from operations was £17.6 million, compared with £22.0 million in H1 2025, while operating free cash flow conversion was 76%.

AI investment gathers pace

Alfa continued to invest heavily in its technology during the period, spending £19.6 million on software development compared with £19.4 million a year earlier.

Investment includes the development of US Auto Originations, Fleet and Commercial Finance capabilities, which Alfa expects to increase both the proportion of the market it can serve and its overall addressable market.

AI is also becoming an increasingly important part of the company’s product and delivery strategy. Alfa has grouped its AI products under the Thea brand, with Thea Core providing the foundation through which AI capabilities within Alfa Systems can communicate with large language models.

The company is developing several customer-facing applications, including Thea Notes, which is designed to summarise and interrogate customer notes, and Thea Lens, an intelligent document processing capability aimed at classifying, extracting and reconciling information within Alfa workflows.

It is also progressing Thea Connect, an Alfa Cloud MCP designed to explore how customers can connect AI assistants directly into Alfa processes while Alfa Systems remains the system of record for permissions, approvals, business rules and audit.

Alfa is using AI internally to improve productivity and delivery efficiency, with implementation pilots underway in both EMEA and the US. In one example, AI-assisted development of transformation code reduced the effort required for a significant data migration task by around 75%.

“After a very strong FY25 we continued to make excellent progress in growing high-quality subscription revenues and are set to continue doing so as customers move through implementation and reach full subscription run rates after final go-live.”

He added: “Looking ahead, we are developing our approach to AI and see the technology as an important accelerator of our strategy that will reduce friction, grow our addressable market, bring more customers onto Alfa Systems more quickly and support further growth in recurring subscription revenues.”

Pipeline remains strong

Alfa completed two customer go-lives and nine upgrades during the first six months of the year. Alfa Cloud customers now total 24, with 16 live and eight in implementation.

The company ended the period with nine prospects in its late-stage pipeline, having started the year with ten. Two opportunities converted into wins during the half, one was lost and two new prospects were added. Alfa is preferred supplier for eight of the nine remaining prospects and is already working under letters of engagement with three.

The first contract win was for the Canadian operations of a global automotive OEM, covering its retail auto and commercial fleet lease and loan book. The second was secured with a major European automotive manufacturer in the UK.

New additions to the pipeline include an equipment finance implementation at a large US bank, where Alfa is already implementing the auto finance book, and a new UK equipment finance customer.

Alfa said it continues to see new opportunities entering its early-stage pipeline, although some projects have taken longer than expected to move to contract. As a result, delivery revenue expectations for the full year have been slightly reduced, but the company expects this to be offset by improved software engineering revenues.

Overall, Alfa said trading remains in line with expectations and it expects to meet its full-year forecasts.