25th Aug 2020 09:51
(Alliance News) - Alfa Financial Software Holdings PLC on Tuesday said its 2020 forecast is now ahead of market expectations, though it is predicting a loss in the second half.
Alfa is now expecting to report interim revenue of around GBP38 million, which would be up 23% from GBP30.9 million a year ago. It expects earnings before interest and tax of approximately GP10 million. Its net cash balance forecast is around GBP68 million. This represents an improvement from the end of its 2019 first half, when its cash and cash equivalents stood at GBP53.3 million.
Trading in the asset finance industry software developer's first half was better than expected with demand "largely resilient to the Covid-19 pandemic" and revenue benefiting from fewer holidays and more billable days worked, though this is set to reverse in the second half.
Underlying interim revenue exceeded company expectations thanks to the successful management of changing customer work schedules, Alfa said. Interim figures will benefit from remote working, which cut travel and marketing costs, though this was partly offset by a rise in overall staff costs due to continued recruitment and below normal attrition rates.
The level of uncertainty is much higher at present due to the pandemic, impeding the company's ability to make accurate forecasts, Alfa said.
Nonetheless, with its strong first half performance having continued into July and "good progress in contract discussions", expectations for the year as a whole have improved.
"At the current time, whilst we are making good progress, we do not have secured cover for all of our available billable time in the remainder of the year. With the impact of additional holidays, we are currently forecasting to make a loss in the second half. However, despite this, and combined with our strong year-to-date trading, we now expect our revenues and profits for the full year to be ahead of current market expectations," said Alfa Financial Software.
Annual consensus market expectations are for revenue of GBP60 million and Ebit of GBP4 million, down 7.0% from 2019 revenue of GBP64.5 million and 71% from 2019's Ebit of GBP13.7 million.
Alfa Financial Software expects to be around 5% ahead of this revenue forecast, however, with most of that improvement falling through to Ebit.
In terms of outlook beyond 2020, Alfa has so far made "good progress" when it comes to converting its late stage pipeline but its early stage pipeline is still weaker than it would like, with the economic outlook uncertain in the medium-term. This could hurt revenue in the second half of 2021 and into 2022.
"Whilst we have seen an encouraging performance so far in 2020, until we have secured more future work, we remain cautious for 2021," Alfa said.
Alfa said it will release its full half-year results on September 29.
Shares were up 2.0% at 77.30 pence in London on Tuesday morning.
By Anna Farley; [email protected]
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