Leading software

Smart people

Unrivalled delivery

Exceptional IP

Alfa Financial Software Holdings PLC

Annual Report and Accounts 2022

About Alfa

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.

ContentsAwards

Strategic report

1 Highlights

2 Leading software

4 Smart People

6 Unrivalled delivery

8 Exceptional IP

10 At a glance

12 Chief Executive’s review

16 Market overview

18 Business model

20 Investment case

22 Our strategy

32 Key performance indicators

34 Financial review

38 Risk management

41 Principal risks and

uncertainties

46 Viability statement

48 Section 172 statement

54 Environmental, Social

&Governance

Corporate governance

71 Chairman’s introduction

togovernance

74 Board of Directors

76 Company Leadership Team

79 Division of responsibilities

81 Board leadership &

Companypurpose

84 Composition, succession

&evaluation

87 Nomination Committee Report

90 Audit & Risk Committee Report

97 Directors’ Remuneration Report

100 Directors’ Remuneration Policy

108 Annual Report on Remuneration

121 Directors’ report

125 Statement of Directors’

responsibilities

Financial statements

127 Independent auditor’s report

135 Consolidated statement

ofprofitor loss and

comprehensive income

136 Consolidated statement

offinancial position

137 Consolidated statement

ofchanges in equity

138 Consolidated statement

ofcashflows

139 Notes to the consolidated

financial statements

175 Company statement

offinancialposition

176 Company statement

ofchanges in equity

177 Notes to the Company

financialstatements

Other information

182 Glossary of terms

183 Shareholder information

Keep up-to-date with our

news at alfasystems.com

ESG memberships

• Highest rated listed company and highest

rated software company in Newsweek’s

Most Loved Workplaces UK, 2022

• Top 20 Investors in People – gold

accreditation

• Monitor Most InnovativeCulture

• Living Wage Employer

• CDP

• ISS ESG

Financial highlights Non-financial highlights

Group revenue (£m)

£93.3m

Revenue growth at

constant currency (%)

Employee retention (%)

90%

Employee engagement

(%)

84%

83.2

78.9

93.3

2020 2021 2022

Operating profit (£m)

£29.6m

Operating profit

margin (%)

32%

Customer concentration

(top 5) (%)

35%

Number of subscription

customers

24.7

23.9

29.6

2020 2021 2022

29.7

30.3

31.7

2020 2021 2022

Cash (£m)

£18.7m

Dividends paid (£m)

£25.5m

23.1

37.0

18.7

2020 2021 2022

32.7

44.2

25.5

2020 2021 2022

Strategic report

Corporate governance Financial statements Other information

Highlights of the year

1995 2003 2010 2017 2019 2020 2021

Key to the success of Alfa today is the

launch, in 2010, of Alfa Systems v5. This was built

with the future in mind: 100% web-based and 100%

Java – making it fully digitally enabled and cloud

native. It is constantly evolving to meet the needs

of today’s customers.

With an excellent delivery history over three

decades in the industry, Alfa’s track record

isunrivalled. The release of Alfa Systems v5.7

isanother stepforward in our dedication to

continuous improvement through the pursuit

ofinnovation.

Leading software

38%

of customers

using cloud

hosting

4.6m

contract

portfolio go-live

Alfa

Systems v5

launched

Alfa

Systems v3

launched

Alfa Start

launched

Cloud

hosting

launched

Alfa Systems

v4 launched

Alfa Start enables us to

deliver a subscription-

based service rapidly for

smaller or less complex

implementations

Read more about Alfa’s approach

toworkplace engagement

at alfasystems.com/careers

“Having worked at a

competitor and returned to Alfa,

I get a lot of job satisfaction

knowing that I am working on

the market-leading product in

the sector. I really appreciate the

Company culture – we’re one big

community, with many talented

individuals, all striving towards

the common goals of designing,

innovating, and implementing our

solution to help our clients and

their end customers.”

Irfan Raza

Solution Architect

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Connor Neal

Implementation Consultant

“When looking for

anemployer, collaboration

anda strong sense of company

culture were high on my list.

Onjoining Alfa, these two points

were evident in the training

alone. AsImet more and more

co-workers, a strong sense of

cohesion was very noticeable.”

“Alfa hired me for my

potential as well as my previous

experience in different fields.

This has allowed me to undergo

training to become a professional

software developer. All while

being supported and paid

throughout. Three years in, I’ve

now been given an enormous

opportunity to move to Australia

and I’m thoroughly enjoying my

secondment so far!”

“I was particularly

drawn to Alfa as a company

because of the fluidity they

offered between their roles,

andafter spending about a

yearinImplementation, Imoved

over toProduct Engineering

asaSoftware Engineer.”

Rosie Carroll

Software Engineer

Musawar Shahid

Software Engineer

Strategic report

Corporate governance Financial statements Other information

Unrivalled delivery

With an excellent project delivery history

over three decades, Alfa and Alfa Systems support

some of the largest and most complex equipment

and automotive finance portfolios in the industry.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

“Alfa Systems is so easy to

configure that we don’t need to be

technical experts in it; we have the

partnership with Alfa, and this enables

usto be experts in our own products

andour ownmarket.”

——— Robin Jeffrey, Head of Transformation,

HampshireTrust Bank

‘‘Throughout our engagement

we have been impressed by the quality

of the Alfa people and their ability to

understand our business and processes.

The implemented solution will significantly

improve the operations of our business and

the products we can offer our customers.”

——— Geoff Maleham, Managing Director, Novuna

Business Finance

Delivering proven functionality and performance each

and every time, Alfa’s track record is unrivalled.

With more than 30 blue-chip customers, we maintain

exceptional customer satisfaction and have never failed

to deliver on project objectives. As demonstrated by

our diverse client base, Alfa Systems handles contract

volumes of all sizes, from typical operations to the

largest portfolios in equipment and autofinance.

Read more on p25

Alfa’s dedicated UI/UX

Design team have accessibility as

part of their core remit. This team

carried out an accessibility audit

of our Alfa Systems software, part

of a major internal investment

initiative which fundamentally

improved the overall UI and UX

ofAlfa Systems. A strand of this

work (codenamed Mercury) was

informed by the Web Content

Accessibility Guidelines (WCAG)

and has gone live at many of

our clients, with hugely positive

feedback fromusers.

additional licensable

modules

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Continued investment in our leading-

edgesoftware to make our customers

future-ready

Alfa continues to invest time and resources in

developing the Alfa Systems product. The total

investment in the product covers development

specifically requested by and charged to customers,

investment done to develop the product for future

upgrades and modules and also research and

development into future opportunities. Some of

these costs are charged to customers, some are

capitalised, and the vast majority are expensed

through the profit and loss account. Taking into

account the total number of days spent by our

engineering teams on developing the product and

the salary cost of those teams, and including an

overhead allocation to account for a proportion of

office and other costs, the total resource committed

in 2022 was £29.1m (2021: £26.5m).

£29m

investment

Focus on investment

2022 saw an increased focus on investment in

functional improvements to Alfa Systems, delivering

more strategic roadmap items to continue to

strengthen our market-leading product.

Read more on p25

Strategic report

Corporate governance Financial statements Other information

At a glance

Alfa systems is at the heart of some oftheworld’s

largest and most innovative asset finance companies.

Supporting all types of auto, equipment and wholesale

finance business, oursoftware platform uses leading-

edge digital technologies to deliver proven functionality

andperformance.

Our purpose and identity

To deliver our leading-edge technology with smart,

diversepeople,making our customers future-ready.

Weareasoftware and delivery company.

Our values

Our values are central to the way we work, both

togetherandwithour clients.

Our vision

To grow the Company size naturally, but grow our impact rapidly.

Key to this is delivering more concurrent Alfa implementations,

more efficiently with a world-class product. We will have a big

company impact, but a small company feel.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

The quality of our people, the knowledge

sharing embedded in the organisation and

the inherent IP within our software, means

that our delivery record is second to none.

customers

new implementations

ofAlfa.v5

The strength of our software lies not only in

the years of knowledge and experience that

has been poured into it, but that it was

designed for the digital environment.

new versions

released

deliveries

Customers can now take a subscription

service,which for a monthly fee

incorporates the licence, maintenance

andhosting services.

hosted clients

28%

growth in hosting

What we do

Diversified customer base at the heart of Alfa resilience

Subscriptions Software Services

54%

£49.6m

17%

£16.3m

29%

£27.4m

In 2022 we launched our

smart hub in Portugal

toboost our Product

Engineering capability

Read more on p28

As of 2022 we have 27 team

members in New Zealand

and Australia

We have a deep experience

of the USA automotive

finance sector and work

with3 of the US’s top 5

autolenders

3 of the UK’s top 5

equipment lessors

Across

countries

continents

Across equipment, auto

andwholesale finance

Across OEMs, banks

andindependents

Strategic report

Corporate governance Financial statements Other information

CEO review

“The inherent robustness of

ourtarget market and our strong, cash

generative financial performance along

with Alfa’s inbuilt operational resilience and

strong pipeline underpin our confidence in

the outlook for the business. This allows us

to announce another special dividend whilst

maintaining a strong balance sheet.”

——— Andrew Denton, CEO

Strong performance

2022 has seen progress across all areas of

our business. We have continued to deliver

successful implementations, supported

byour scalable and reliable cloud-native

hosting solution, at the same time as

releasing significant enhancements to

oursoftware.

We saw strong financial performance, with

revenue up 12% to £93.3m (2021: £83.2m)

with growth across all of our revenue

streams. On a constant currency basis

revenue was up 8%. Operating profit

growth was stronger, up 20% to£29.6m

(2021: £24.7m) with net costs up 9%. Cash

conversion was robust at 102%, and we

finished the year with net cash of £18.7m,

after paying dividends of £22.5m and

spending £5.6m on purchase of

ownshares.

Total Contract Value (TCV) grew 7% in the

year to £143m (2021: £133m) and we have

astrong pipeline giving us confidence in

future growth.

We have continued to make good progress

indiversifying our customer base and

increasing our recurring revenues. Our

topfive customers contributed 35% of our

revenues in 2022, compared with 37% in

2021, 48% in 2020 and 61% in 2019. We had

17 customers contributing revenues of more

than £2m in the period, up from 14 in2021,

10 in 2020 and seven in 2019. 75% of our

revenues is recurring in nature.

Recruitment picked up towards the end

ofthe first half and into the second half,

afteraslower than planned hiring start tothe

year in a tight labour market. At 31December

2022 we had a headcount of 441 (2021: 382)

up 15%. Average headcount in the period of

420 (2021: 383) was a 10% increase on last

year. Our strong pipeline and high level

ofrecurring services revenue has enabled

ustoremain chargeable through the year.

Ourteam retention remained high at 90%

(2021: 87%) for the year. Also pleasing was

our employee engagement, which is now

at84%, a record level.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Strategic progress

Alfa is a leading asset and automotive

finance software company with global scale.

Our platform, AlfaSystems, is class-leading

asset and automotive finance software,

supporting some ofthe world’s largest and

most innovative companies some of whom

have been with us for over 30 years,

migrating in recent years onto our modern

v5version of the software.

We provide market-leading software

toahuge and diverse end market.

Ouropportunity to grow market share

isenormous.

Our vision is to grow our company size

naturally, but grow our impact rapidly

– always retaining our underlying culture.

Key to this is delivering more concurrent

implementations of our world-class Alfa

Systems more efficiently. We will have a big

company impact, but a small company feel.

We have continued to make good progress

in2022, with the key achievements

highlighted below.

Strong growth in Subscription

Subscription revenues are recurring

innature and arise from subscriptions

forour software, cloud hosting and

maintenance services.

Subscription revenues continued to grow

strongly in the period, up 17% and now

contributing 29% of our revenues.

We have a Cloud Hosting first, subscription-

led approach to sales. Cloud Hosting gives

us benefits in the speed of implementation

for our customers as well as the reliability

and flexibility of the service. Our hosting

service also provides built-in tools, including

automated monitoring, patching and

scheduling. We anticipate that the majority

of new customers will choose a hosted

service with licence and maintenance added

into their subscription. We have thirteen

customers using Alfa Cloud Hosting.

At Alfa we pride ourselves on the security

and rigour of our development, deployment

and management processes, particularly

inour Alfa Cloud Hosting service. Our

customers are able to rely on our ISO 27001,

ISO 27018 and SSAE18 SOC 2 Type II

certifications and reports to maintain their

confidence in our offerings. In 2022, we

added SSAE18 SOC 1 to our audit schedule,

and can now offer a SOC 1 Type I report to

our hosting customers. This provides

customers and their financial auditors with

an even greater level of confidence in our

services as well as easing their own audit

burden. During the year we have continued

to build skills and capacity in our Information

Security team to ensure that we continue to

maintain the highest standards of security.

Developing our industry-

leading Software

Software revenues arise from the sale of

perpetual licences and development work

for new and existing customers.

Our strategy is to continue to develop

oursoftware, to ensure that we meet

andexceed customer and market needs

asthey evolve and as the regulatory and

commercial environment continues to

change. We believe we have the industry-

leading software, due to the functionality,

capability and usability that has been

developed over many years along with

themodern technology it is based on.

Wecontinue to invest to maintain

that lead.

In the year we achieved a record number

ofdeliveries, with twenty-eight upgrades

ornew customer go-lives.

We release an upgrade every four weeks

and periodically we release a major new

version of Alfa Systems with step change

functional and technical advancement.

InQ3 2022 we released version 5.7. This

included an updated user interface with

improvements to our already best-in-class

user experience and enhanced credit

decisioning capability. Version 5.7 also

improved Alfa’s ability to manage

configuration for multiple jurisdictions

“Our vision is to grow

our company size naturally, but

grow our impact rapidly – always

retaining our underlying culture.

Key to this is delivering more

concurrent implementations

ofour world-class Alfa Systems

product more efficiently. We will

have a big company impact, but

asmall company feel.”

Strategic report

Corporate governance Financial statements Other information

CEO review continued

andwhite-label relationships in a single

instance, consolidating our leading

positioninmulti-country, multi-channel

implementations. Inaddition, this release

had added functionality for allocating

revenues acrossindividual assets, which

isparticularly important for equipment

lessors, and alsofor billing arrangements

unrelated to assets which adds to Alfa’s

already extensive support for financial

product innovation.

We have strengthened our Markets

andProducts team, which uses in-house

expertise as well as feedback from customers

and the wider market to plan our roadmap

for further investment in our software.

In 2022 we announced a partnership

withTomorrow’s Journey to create the

onlyfull, end-to-end enterprise-level

solution for subscription and usage-

based mobility. This is the first of what

weanticipate will be many ecosystem

partnerships for Alfa Systems.

Overall software revenue was up 20%

onlastyear. Development days, including

those upgrading from older versions of Alfa

Systems to v5, were strongly up on last year.

We are particularly happy whenanexisting

Alfa customer upgrades an older version

ofAlfa toAlfa Systems v5. This shows the

strength of the customer belief in Alfa.

High quality Services and

growing partnerships

Services revenues arise mainly from a

regular stream of non-development work

we do for existing customers and also work

on implementations for new customers.

Overall Services revenues were up 8%

onthe prior period. We have continued

todeliver avery high level of work to

bothnew andexisting customers. Of

theServices revenues, 68% were with

existing customers adding to ongoing

recurring revenues.

We had two customers successfully go live

in the year, both of which were minimum

viable product go-lives leveraging Alfa Start

as an accelerator. We also started work on

afirst implementation inMexico for an

existing customer.

As we continue to execute our strategy and

move towards a higher level of operational

gearing and efficiency in our business, a

greater proportion of our time was spent

on software development which has

contributed to increasing Software revenues.

Increasing our access to skilled delivery

partners is a key element of our strategy for

increasing the number of implementations

we can deliver. In the period we have

continued to make strong progress with

a58% increase in partner chargeable days

over the same period last year. In Europe

we added ITDS, as an augmentation

partnertoour already successful partner

programme. We also made good progress

in the year with US partnering, alongside

continuing to expand our existing European

partner programme. We are supporting

one of our European partners in setting up

in the US and we have signed a partnering

agreement with a new US partner. Work

commenced with them at the end of 2022.

Alfa iQ – building products

We continue to work through a variety

ofusecases with new and existing

clientswhere advanced machine

learningtechniques can provide value

andpositively impact our customers’

financial performance. With our first

payingcustomers announced in Q1 2022,

wehave now built the foundation of our

credit scoring solutions with tooling for

decisioning, training, analytics and

explainability ready for deployment.

Strong engagement with

ourpeople

We continue to focus on recruiting and

retaining the best people in our industries,

and so we were delighted to be awarded

Investors in People Gold status. We were

alsoranked the highest rated listed company

and highest rated software company in

Newsweek’s UK Most Loved Workplaces.

Thisreflected our own internal surveys

where we achieved a record score for our

own employee engagement.

Our team charters, developed collaboratively

by individual teams, have been successfully

implemented and new smart working

patterns have been established. These

haveevolved as the year has progressed

withan increase in in-person meetings

across the business which has greatly

helped to strengthen our connections,

particularly with those who have been

recruited since the lockdown. We see the

benefits of hybrid working, balancing

in-person collaboration with more flexible

working patterns for our teams continuing

into the future and this has enabled us to

assign the lease on one floor of our London

office to reduce our ongoing costs.

We have made good progress with our

smart hub in Portugal. We expect to be

ableto extend this model to other locations

in the future to give us access to talent pools

outside our principal engineering centre in

London which will help limit the increasing

cost of acquiring development skills.

Capital return – £100m

ofdividends since IPO

We remain a strongly cash generative

business and continue to generate more

cash than we need for our growth plans.

Weemploy three mechanisms for returning

this excess cash to shareholders. Firstly,

wehave a regular dividend, which we intend

to grow progressively as our profits grow,

inline with our stated dividend policy.

Wepaid the 2021 final dividend of 1.1p

or£3.3m in the first half. Secondly, we

havea share buyback programme that we

launched in January 2022. We bought 2.8m

shares at an aggregate cost of £4.7m in the

period. Finally, we return any excess cash

after funding the regular dividend and

theshare buyback programme through

special dividends.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

In 2022 we paid total dividends of 7.6p per

share or £22.5m. Even after these dividends

and the share buyback programme, we

finished the period with a strong balance

sheet withnet cash of £18.7m and we expect

further strong cash generation in 2023. As a

consequence, the Board is proposing a final

dividend of 1.2 pence per share, 9% up on

last year (2021: 1.1 pence), with an ex-dividend

date of 25 May 2023, a record date of 26 May

2023 and a payment date of 26 June 2023. In

addition, the Board has decided to declare a

special dividend of 1.5 pence per share, with

an ex-dividend date of 13 April 2023, a record

date of 14 April 2023 and a payment date of

9May 2023. Together these dividends would

amount to a total payment of c£8.0m, which

in aggregate will take total dividends as a

public company to c£108m.

Steady market conditions

The macroeconomic outlook is uncertain

atthe moment. Alfa Systems software is

now operational in 37 countries; across

automotive finance, equipment finance,

wholesale finance and commercial

lendingmarkets; for OEMs, banks and

independents and across all asset classes.

The breadth and diversity of Alfa’s business

interests help to insulate us from

uncertainty in individual geographies

andsectors of our target markets.

Along with Alfa’s operating diversity providing

insulation against the current economic

uncertainty, themarket itself provides

protection. The asset and automotive

financemarket is a more secure form

oflending and it has a history of gaining

market share in uncertain times compared

with non-asset backed lending markets.

Inaddition, the need for software is not

associated with new business alone; large

players in our market will have significant

extant portfolios to manage whether they

arewriting new business or not and these

portfolios will besubject to the same drivers

of technical change as growing businesses.

Regulatory change, digitalisation and the

growing need for flexibility continue to

drivecustomers to review their systems,

particularly those still running on legacy

platforms, and they will continue to select

flexible modern systems.

The asset and automotive finance software

market remainsrobust and demand for

technologymodernisation continues.

Withour functional, flexible, modern,

cloud-native system, we are extremely well

positioned tocapitalise on that demand.

Strong pipeline

With market drivers and the competitive

landscape pushing customers to review

their systems, we remain confident in

ourability to demonstrate the strength,

flexibility and modernity of our own

software as well as the quality of our people.

We have a strong late stage pipeline and we

remain confident inour ability to convert

most of these intowins. We also continue

tosee activity coming into the early stage

pipeline which gives us the confidence that

our target markets remain robust at this

time. These prospects are additive to our

TCV and will provide additional support

forour revenues in 2023 and 2024.

Outlook

We have delivered an excellent financial

andoperational performance in 2022.

Thisperformance alongside the strategic

progress we have made, the confidence

wehave in the quality of our people, the

strength of the intellectual property in

oursoftware and our late-stage pipeline

give us great confidence in Alfa’s prospects

for 2023 and beyond.

Andrew Denton

Chief Executive Officer

1 March 2023

“Our strategy is to

continue to develop our software,

to ensure that we meet and

exceed customer andmarket

needs as they evolve and as

the regulatory and commercial

environment continues to change.

We believe we have the industry-

leading software and we continue

to invest to maintain that lead.”

Strategic report

Corporate governance Financial statements Other information

Market overview

Through our

Markets and Products

team, Alfa is at the

forefront of prominent

trends and is well

positioned to respond

to customer needs in

the current economic

environment. This

informs investment in

our product, enabling

us to retain our market-

leading position by

giving our customers

the tools they need

tosucceed.

Global

trends

USA

The global post-pandemic recovery has lost

momentum, with many countries battling

inflation, disruptions to supply chains, and higher

oil and gas prices following the Russian war on

Ukraine. As a result, our clients face rising interest

rates and concerns over reductions in origination

volume and increased payment default risk. But

these trends have not significantly affected their

revenue or profit, with historically high prices

ofused vehicles holding up RVs, and smartuse

oftechnology enabling better creditdecisioning.

In addition, a number of prominent trends are

shaping the future of the automotive industry.

Post-pandemic sentiment, uncertainty over

innovation and regulation, increasing ownership

costs, and a rise in demand for flexibility are

boosting flexible ownership models and the

riseof multi-modal business models.

What this means for Alfa today

The asset finance industry has proven resilient

touncertainty in its economic environment.

During these periods, companies need to invest

in software for their asset finance operations

tocapitalise on their competitive edge and

promote efficiencies.

Alfa’s product investment process is focused

onmeeting the demands of an ever-changing

sector. Reacting to current trends, Alfa has

invested in expanding functionality to enhance

credit decisioning and collections — and in

making configurable workflows faster and more

efficient, ever important as providers look to cut

spending. Inanew venture, Alfa has partnered

with Tomorrow’s Journey, a provider of

subscription-based software, to demonstrate

an integrated end-to-end solution to clients for

short-term leasing subscription requirements.

What this means

forAlfatomorrow

Alfa will continue to invest in expanding

functionality to meet and anticipate clients’

needs, to remain a leading asset finance

software provider. We are monitoring market

developments around ‘Asset as a service’,

multi-modal business models, and enhanced

credit decisioning and data collection to

improve our product and ensure that our

clients can keep ahead of market trends.

The US is expected to be impacted by the

global economic downturn. That may lead to

consolidation of asset finance market players,

with the market projecting weaker demand

and tighter lending standards to manage

increased default risks.

Ultimately, despite the expected worsening

economic environment, the US is the largest

asset finance market that tends to remain

resilient, with players investing in automation,

and making operations and workflows more

efficient. This is already apparent in the

equipment industry, which has shown

investment growth in some asset classes,

particularly in the mining and oil industries.

Similarly, although lacking the level of emission

reductions and green vehicle adoption deadlines

seen in Europe, major American captives are

scaling up their EV production and offerings.

What this means for Alfa today

Alfa continuously invests in its product

tomeetever-changing client needs and

economic cycles. Recent investment in

collections andcredit offering enhances Alfa

functionality supporting clients’ focus on risk

management oftheir portfolios in time of

economic downturn.

The ability for clients to report in real time on

their portfolio allows them to track industry

trends as well as portfolio and process

performance, helping our clients to identify

areas of concern and opportunity, such as the

ability to introduce new products or streamline

key processes ahead of a forecasted spike

involume.

What this means

forAlfatomorrow

As one of the largest asset finance markets in

the world, Alfa has previously invested and will

continue to invest in the US, supporting various

client needs. A key ongoing investment is to

enable ‘always on’ functionality, allowing more

efficient cross-US operations. In addition, Alfa’s

continued focus on automation, configurability,

and connectivity means our customers are

better prepared to face uncertain economic

environments, by making their operations

more efficient.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Technology

trends

Australia &

New Zealand

Europe

Despite the current economic environment

inEurope, Fitch Ratings reported that the 20

largest European banks, including many of the

Eurozone’s top asset finance providers, are in

astrong position to manage an anticipated

downturn intheir respective national

economies. The EUand major European

countries are leading the world on updating

regulatory ESG requirements. This is creating

adynamic market within asset finance – with a

strong focus on minimising the environmental

impact of an asset’s whole end-to-end lifecycle.

The circular economy is viewed as a necessary

precondition to ensure regulations can be

metnow and in the future. This creates an

opportunity for business change and hence

technological change.

What this means for Alfa today

Alfa’s flexibility continues to ensure that clients

in Europe are able to configure their system

tomeet their changing business needs.

Enhancements to asset-level functionality

being rolled out in 2022 enable clients to

extend their usage of Alfa to better meet the

needs of assets through a circular lifecycle.

The UK Alfa Start product has allowed us

torollout ‘zero enhancement’ projects,

gainingsubscription revenue through lower

implementation costs in an increasingly

buyer-led market.

What this means

forAlfatomorrow

Alfa is working in partnership with our clients

to enable product development that allows

ourusers to stay up to date with market

andregulatory developments. We expect to

further invest in ESG-related functionality, as

regulatory requirements evolve over the time,

supporting our clients to manage the transition

to new reporting standards. Alfa continues to

invest in and innovate its delivery methodology,

building on a proven track record of delivery.

Australia is an attractive asset finance market

supporting strong mining, agricultural and auto

sectors. The SME sector has performed well in

2022, increasing demand for finance. As with

other markets, the Australian economy is

feeling the global pressure of rising inflation

and higher interest rates. However, corporate

activity is creating opportunities as new,

smaller players start to disrupt the market.

Large financial institutions have been selling

existing portfolios to improve their capital

ratios and ESG targets, while smaller finance

companies have grown rapidly by forming joint

venture partnerships and providing white

labelling to manufacturers, and acquiring

existing portfolios with investment from equity

partners. Recent large-scale data breaches in

the Australian telecommunications and health

insurance industries have brought additional

scrutiny of data security with regulatory

changes likely in future.

What this means for Alfa today

Alfa has a strong presence in Australia and

NewZealand due to its relationships with some

of the region’s largest banks and captives. Alfa

will continue working in partnership with our

clients to add new channels and services to

grow their businesses, including continued

development of electronic point-of-sale

features for multiple clients. Alfa continues

toimplement enhancements to further enrich

the product for the Australian market.

What this means

forAlfatomorrow

Alfa will work on developing new relationships

in the region, leveraging our knowledge of

localrequirements, regulations, and service

provider integrations. Our modern technology

stack, which includes robust and advanced

security controls, places Alfa in an excellent

position should regulatory change drive

finance companies to replace systems. We

expect that ESG regulatory requirements will

increase, and anticipate investment in this area

to support our existing clients and provide a

compelling offering to the market in this space.

The local Alfa Support centre, based in Sydney,

also provides an advantage for customers and

prospects demanding local support.

The trend for data-driven, innovative solutions

continues as companies look for ways to thrive in

a tough environment. Advanced analysis tools,

incorporating artificial intelligence or machine

learning, are being increasingly utilised. The use

cases are as diverse as automatic customer

verification to discovering creditworthy customer

segments. The need for greater understanding

ofthe customer is driving Alfa’s clients to develop

integrated omni-channel solutions for both

origination and the full contract lifecycle.

Thisallows them to better personalise user

experience, creating more customised offers.

The internal pressure for efficiency and access

toinnovative enhancements, focused on

performance and security, is continuing to push

customers into cloud-based platforms. This

benefits customers with faster upgrades and

outsourced maintenance, allowing them to

concentrate on developing their core offering.

What this means for Alfa today

In 2022, Alfa developed a rules-based credit

engine that enables customers to make better

decisions, utilising internal or external APIs to

allow processing of results from AI-based tools,

complex credit score cards, CRAs or in fact,

Alfa’s own AI-based credit decisioning model,

developed with Alfa IQ. Alfa is constantly

updating its suite of external web services

andAPIs that clients can use to develop their

own customised digital services. These enable

customers to offer their users a full end-to-end

journey, with everything processed behind the

scenes by Alfa. Alfa’s cloud hosting and Docker

containers enable us to deliver more efficiently,

so that our customers can focus on their

business strategy rather than infrastructure.

What this means

forAlfatomorrow

Alfa is at its heart a technology company.

Itsemployees are encouraged to explore

newtechnologies and develop new product

ideas or partnerships. Innovation events allow

every employee to come together to design

and deliver an idea for the product, and they

are supported through this process by an

experienced technical team. Externally, Alfa

uses market events and consultants to ensure a

full understanding of the technology landscape.

This allows Alfa to monitor and invest in new

technologies and innovative solutions through

partnerships or investment initiatives. Iterative

development of product solutions allows our

customers to keep pace with market trends.

Strategic report

Corporate governance Financial statements Other information

Cash

Revenue

Software Subscriptions Services

Delivery

Excellent delivery track

record strengthens our

market position

People

Smart and diverse people

strengthen our market-

leading position

Alfa software

Leading-edge technology

making our customers

future-ready

Exceptional IP

Growth provides career

development and rewards

for our people and partners

Retain cash for future

needs and innovation

Business model

Value creation and delivery

Our differentiators

Our resources

Partnerships

Partnerships are an important growth

accelerator, bringing a number of

benefits to Alfa and our customers.

Employees

With over 400 employees worldwide,

our people are our greatest asset

developing organically from graduate

toseniors.

Financial strength

Strong balance sheet with organic

growth, consistent margin improvement

and disciplined capital allocation drives

positive cash flows.

Innovation

Our innovative software leads the

industry in functional scope,

performance and user experience.

Read more about our culture and

values on p54-69

Delivery track record

Our best practice

methodologies and

specialised knowledge

ofauto and equipment

finance enable us to

deliverlarge system

implementations and

highlycomplex business

change projects.

Unify systems

Alfa Systems helps

customers reduce

complexity by consolidating

disparate legacy systems,

integrations and

workarounds. Alfa Systems

removes these inefficiencies

by using a single platform

with a single database.

Innovate and challenge

inmultiple markets

Multi-entity, multi-

regulatory, multi-currency

and multilingual. We react

quickly in a complex and

changing market and

adaptto match business

requirements and customer

needs as they evolve.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Companies require

innovation and

customer-specific

enhancements

Our delivery track record and

market-leading software drive

recommendations and additional sales

Strengthening our

market position

Expanding our

addressable market

Our growth

Our exceptional IP drives our growth

New markets and

geographies require

software

development

Existing

clients

Addressable

market

New addressable

market

Adjacent

markets

Value creation

Employees

Alfa has Investors in People gold

accreditation and other awards.

Contribution to SDGs

Shareholders

Strong cash generation and £100m

ofdividends since November 2020.

Contribution to SDGs

Suppliers and partners

We have grown our partner ecosystem,

agreeing engagement terms with a

notable global professional services

organisation for the combined marketing

and delivery of the Alfa Systems platform.

Contribution to SDGs

Clients

Simple deployment models enable us

todeliver Alfa Systems more efficiently

and earlier.

Contribution to SDGs

Communities and environment

In 2022, we raised over £40,000 for our

regional charities.

Contribution to SDGs

Read more in the ESG section on p55

Create an omnichannel

experience

We empower customers,

dealers and vendors

through enhanced

self-service and

omnichannel technology.

Perform through

leading-edge tech

Alfa Systems is designed

ground-up with the latest

technology to allow easy

integration into other

systems and to work in a web

environment with scalable

performance, proven for a

10 million contract portfolio.

Achieve operational agility

Streamline operations

through process

automation, across

different functions and

geographies. Achieve

greater control, connected

processes and a seamless

flow of information.

Strategic report

Corporate governance Financial statements Other information

Investment case

Alfa Systems is a leading auto and

equipment finance software platform.

Purpose-built for auto and equipment

enterprises globally, developed to meet the

current and future needs of the industry.

Diversification

Alfa continues to win customers,

broadening across sectors and

company size.

Recurring revenues

Embedded customer relationships

drive strong recurring revenues,

augmented by Cloud Hosting.

Exceptional IP

Strong existing IP being

continually enhanced with

newIP including Alfa iQ.

Cash-generative growth

Clear strategy, which can be self-funded,

to deliver continued growth and

dividends to shareholders (£100m in

dividends paid out from 2020 to 2022).

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

A robust

balancesheet

£19m

of cash (2021: £23m) and no

bank debt (2021: £nil)

An impressive cash

conversion rate

102%

2021: 114%

* Source: A Deloitte view of the asset finance software

industry, published in 2022.

Massive market

The software market serving the

asset finance industry is massive

($3.4bn*) and relatively resilient.

Global leasing potential addressable

market is over $1.3tn.

Push and pull market drivers

Market demands are driving the need for

modern specialist software. Push factors

include regulatory and cyber security

concerns. Pull factors include digital,

mobility and cost reduction opportunities.

Barriers to entry

Market complexity and changing

regulation creates a significant barrier

to entry to new software providers.

Market-leading software

Alfa is recognised as leading software

inthe automotive and asset finance

industry, with the best delivery record

and people, but with only around 3%

ofthe target market spend.

A compelling

investment

opportunity

Strategic report

Corporate governance Financial statements Other information

Our strategy

Everything we do supports our growth and

strategy. Additionally, our growth is powered by

accelerators – Technology (read more on p25),

Subscription (read more on p27), Partnerships

(readmore on p30) and Alfa Start (read more on

p31). Each accelerator is embedded in the relevant

“S” of our strategic framework.

Sell

Focus on cloud-hosted,

subscription sales to

ourtarget markets.

Read more on p30

Strategic report

Corporate governance Financial statements Other information

Strengthen

Alfa Work Experience

programme

Alfa launched the first Alfa Work Experience

(AWE) programme in 2022. Promoting

Diversity & Inclusion, Alfa Work Experience

programme gave students from diverse

backgrounds a chance to experience a

fintech work environment.

Find out more about Alfa Work

Experience programme on p69

People

Newsweek’s UK most loved workplace

In the second quarter of 2022 in our

globalPulse survey we achieved an overall

engagement score of 83% which was a

record at that time. This score was matched

in Q3 and then beaten by the Q4 score

of84%.

Highlights

#WeAreAlfa

This year we have focused on our transition

to smart working and becoming a successful

hybrid workforce. We’ve supported

Managers and their teams with this move

and some of the challenges (and benefits)

that this new level of flexibility brings to Alfa.

2022 has been a year of reconnecting with

colleagues after a period of uncertainty

during the pandemic. We were thrilled

tohave been able to gather our teams

in-person at our various company events

– whether in New Zealand, Australia,

theUSor in the UK. We’ve had

opportunities tocollaborate, socialise,

makenew connections, deliver engaging

company updates and travel to other

regions, all supporting our culture and

ourrelationships.

Developing our people continues to be a

highpriority and the launch of our Learning

Management System introduced a new way

of learning for all at Alfa. The content is

co-curated by learning specialists alongside

our in-house technical experts across the

company. Over 150 modules and courses sit

on the platform at the end of 2022, with more

content being added on a regular basis.

Inclusion & Diversity has been a core focus

this year and we kicked off 2022 by laying

out our pledges for this area. We have

undertaken a huge number of initiatives to

improve Inclusion & Diversity across the

business, many of which are underpinned

by the efforts of our employee-led

AlfaCommunities.

This year we reached a significant milestone

when we tipped over 400 employees

globally. Our continued efforts to recruit and

retain our talent have not gone unnoticed

and we were proud to be recognised with

various award wins and shortlistings in 2022.

Particular highlights were achieving gold

accreditation with Investors in People and

highest ranked listed company and highest

ranked software company in Newsweek’s

Most Loved Workplaces in the UK.

Find out more about our people, our

communities, our awards and more on

pages 58-61.

Plans

Looking ahead to 2023, we are excited

tobeable to continue to grow and remain

committed to recruiting, retaining and

developing the best talent – doing more of

the things our colleagues value and pushing

ourselves to make even greater strides in

the area of inclusion.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Highlights

One of the big 2022 highlights is our latest

software release v5.7. The latest release

follows two years of new enhancements in

key areas of the product, with new offerings

in the user experience, charges and billing,

and configuration among the highlights.

Meanwhile, changes to existing functionality

include wholesale, integration and Alfa

Systems’ highly valued reporting solution.

Andrew Flegg, Alfa CTO, said: “We’re

committed to helping our clients achieve as

much as they can, as painlessly as possible.

This is because we know they don’t want to

worry about systems – they want to get on

with doing business, and staying

competitive in the market.

“Each time a customer takes Alfa Systems

for the first time or upgrades to a later

version, they are taking on a wealth of

functionality and technical capability that

helps them run their business better, build

a more robust operation, save a lot of

valuable time, and focus their expertise

elsewhere. Our platform gives them the

power and flexibility not just to respond

tochanging business needs, but get

aheadof them too.”

Plans

Alfa’s dedication to continuous

improvement is underpinned by a pursuit

of innovation that runs throughout the

Company. Many of the features in the v5.7

release come directly as a result of market

or customer needs, but plenty have come

about as a result of opportunities identified

by Alfa’s own developers and architects to

keep improving how the cloud-native Alfa

Systems delivers customer needs, how it

communicates with other systems, and how

it can improve the day-to-day lives of our

many users.

Product

Alfa iQ

Alfa iQ is a joint venture established in

2020 between Alfa and Bitfount. Bitfount

specialises in cutting-edge, privacy-

preserving techniques, which allow

machine learning to be performed across

multiple datasets without requiring the

transfer or sharing of any raw data.

Alfa iQ’s current focus is credit scoring and

workflow optimisation. In 2022, Alfa iQ

completed a back-testing analysis of what

would have happened with our models

fortwo clients, both showing strong

improvements over existing approaches.

Furthermore, a project for aclient was

completed where workflows were

analysed. This confirmed various ideas

that the client had of where to optimise

workflows. In addition, we are in the

contracting phase with a client to evaluate

the Alfa iQ credit decisioning system. This

will involve integration with their actual

live decisioning system and checking what

would have happened if our system was

enabled. Finally, a new ‘explainer’ system

was implemented that explains Alfa iQ

machine learning models. This is a key

requirement for customers to move away

from traditionalscorecards.

Strategic report

Corporate governance Financial statements Other information

Strengthen continued

Delivery

20+

upgrades

Kilian Noack

Mercedes-Benz

LeasingDeutschland

“We have been looking for the best

platform for financial services in order to

futureproofour system landscape – and found

a strong partner in Alfa. Apart from Alfa’s core

technical capabilities, we base our business on the

same core values and with a fully integrated team,

Alfa is a majorpart to our success.”

Highlights

2022 has been a strong year for scaling

upAlfa’s delivery activities, building further

on the success of 2021. In the past 12

months we have seen the second go-live

forone of our existing clients, a global

automotive firm who were already an Alfa

customer in the US, and who have now

expanded their use of Alfa into their

German operations, marking a second

territory with this client.

We have concluded a pan-European

AlfaSystems rollout, including multiple

migrations, covering back office functionality.

One of our Australian projects with another

global giant in the automotive industry has

seen significant progress, signifying growth

and fortification of our operations inthe

Asia-Pacific region.

These examples are testament to our

trackrecord of delivering a quality product

with professionalism and efficiency

alongside an enduring customer rapport.

As a result, we arewell-positioned to attract

further businesswith long-term customers

andstrengthen our market share within

theasset finance industry.

As well as go-lives, we have completed an

upgrade project to move a longstanding

customer from Alfa Systems v4 to v5.

Therehave also been a number of other

upgrades taken across all territories,

wehave made significant progress

withthese.

Plans

We are expecting 2023 to be a record year

for new customer go-lives across all our

territories along with several new prospects

in discussion for onboarding in the coming

months. We will continue to ramp up our

delivery of successful go-lives and upgrades

with new and existing clients, further

expand our global footprint, and cement our

positioning as a market leader in the field of

asset finance technology.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Highlights

Our presence at key industry events in

Europe and the US continues to position

usas the quality choice. Our high profile at

these events has ensured increased brand

exposure, advertising and media coverage.

We have also secured strategic speaking

and panel participation sessions, further

enhancing our industry authority and voice.

In addition to contextual, market-relevant

messaging, in 2022 we have produced

acompelling thought leadership

programme, including ‘Digital Directions 3’,

the ‘Innovation in Implementation’ series

and a paper on energy efficiency written

jointly with Capitas Finance.

Our Sell strategy is to focus on cloud-

hosted, subscription sales. This goes hand

in hand with continuous improvement of

our cloud-hosted proposition. Following

onfrom the delivery of containerised

deployment support in 2021,we have

migrated almost all of ourcustomer

environments to the new platform. In

doingso we have also moved Alfa Digital

Gateway to dedicated servers which are

independently scalable and provide highly

available APIs for our customers’ platforms

across upgrades. We have moved from an

early invitation-only beta of our customer

portal to generalavailability for all of our

customers. In this first release customers

are able to download audit documents,

monitor real-time environment and backup

status information and view availability

statistics for previous periods.

Plans

In 2023, we will continue to focus on

Alfa’sbrand, events and thought leadership

of the highest calibre. Regarding our

cloud-hosted proposition, we plan to

buildon the work done in 2022 and roll

outAurora PostgreSQL 13 and Serverless

v2 databasesto all customer environments.

Serverless DB

Continuous improvement of our cloud-

hosted proposition is in line with our Sell

strategy. Earlier in 2022 the Serverless v2

database product was launched and the

Alfa Hosting team quickly introduced

support into our automated deployment

platform. This new product allows the

database to dynamically scale according

to the applied load, a perfect fit for

businesses where the load varies

throughout the day and is often much

lower outside of business hours and

allows us to offer Alfa Hosting to a wider

range of customers.

In order to get a feel for the suitability

ofthis service for Alfa Hosting, we

completed a full performance test against

a platform using a test portfolio of over

one million live agreements and

compared to a baseline for a fixed

capacity database.

Our results showed that with a little

additional tuning we will be able to

offerbatch performance which exceeds

ourcurrent offering for all existing

customers without any increase in

infrastructure costs or complex

infrastructure management.

Over

80%

of prospective customers selecting

AlfaHosting

Sell

Strategic report

Corporate governance Financial statements Other information

Scale

400+

employees globally

Highlights

In 2022 we saw a number of upgrades,

continuing a trend of positive growth that

we have experienced over the past four

years. This has been achieved through the

deepening of our client relationships to

allow us to explore new opportunities and

tailor our offerings to the client’s needs, by

growing our staff headcount worldwide, and

augmenting teams with resources from our

delivery partners where required.

This, alongside the improvements we

havemade in simplifying our migrations,

developing and improving technical

documentation, and broadening the set of

processes and standard integrations of our

Alfa Start offerings, has augmented our

delivery capacity and has been key to our

year-on-year success in scaling our

operations globally.

Plans

Capitalising on our success in 2022, we

expect 2023 to be a busy year for go-lives

across the globe. This comes with the

momentum of a 3-year period of increased

go-lives, showing that there is still plenty

ofroom for growth within the asset

financemarket.

We are also scaling our Alfa footprint at

multiple clients with either stocking or

wholesale go-lives, or by expanding into

another business unit.

Our market-leading product and world-

class service has proven incomparable and

has driven the strengthening of our existing

client relationships, creating further

opportunities for us to grow alongside

ourclients.

Product Engineering SmartHub

As we continue to grow as a business we

recognise that talent is widely distributed

and the lessons of remote working

overthelast two years have shown

thatourengineering teams continue

tobeproductive due to our long term

investments in technology for our business.

Various locations were evaluated and

wehave chosen Lisbon to be our first

Engineering Smart Hub. This will consist of

two teams who can periodically co-locate to

plan and build deeper team cohesion. We

have seeded the teams with experienced

engineers from our existing UK operation,

who will be involved in all aspects of the

operation, from recruitment, through

onboarding into business-as-usual team

leading roles. These engineers have a goal

of ensuring that the local recruits are as

integrated into the Company culture and

practices as any recruit working in the main

office would be, with a longer-term view of

self-sustaining teams without the need for

the original seeds. The initiative has started

successfully with a group of local engineers

already onboarded and, as part of our

engineering team, working on our product

backlog. We will continue our recruitment

into 2023 and are already improving

processes in order to establish

apatternasto how we could use

themodelin further locations.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Simplify

clients migrated to Docker

Highlights

With the launch of Alfa Systems v5.7 we

havefurther improved our support for

containerised deployment, via Docker, and

removed the need for complex, expensive

application servers which often add little

value. Implementations are faster as fewer

decisions and less domain knowledge

arerequired before anoperations team

canget started. Newfeatures in advanced

configuration management help our clients

more effectively manage their configuration

testing and updates across multiple

environments, parameter segregation

allowsfor more streamlined use across

multiple jurisdictions, whilst improvements

to reschedules allow wizards to be

effortlessly integrated into workflows.

The investment in seamless integrations

with other leading-edge systems for asset

management and know-your-customer

checks, allows our clients to focus on their

business differentiators. To this end we

arecontinuing to develop integrations

withcredit reference agencies and other

data providers.

Our investment in UI and UX has resulted

inAlfa Systems v5.7 launching with our

newrender framework. The dashboard

hasbeen overhauled and a new simplified

authorisation approach applied. Users will

benefit from a workflow sidebar which has

been redesigned based on extensive user

research, this gives a clearer separation

ofworkflow actions and the subject of the

workflow. Better use is made of space to

improve legibility and accessibility, with the

sidebar being rationalised and able to be

collapsed to declutter the user’s space.

Continuing our work next year we intend

toput more control in the hands of clients,

helping users focus on use-cases specific to

their business context by further improving

the control over the data which is presented

at different workflow steps.

Plans

As part of our continuous improvement,

weare building on our Portfolio Load

investment which provided a simplified

andquick option for migrations or

portfolioacquisitions.

In 2023 we will use this tooling for some

ofour planned migrations and may look

towiden the scope of what products,

structures and volumes it supports.

Engineering Simplification

Investment in our product technology

for the long term has meant that

wehave continued to improve the

encapsulation of functional code areas

and provide guardrails for engineers

toensure that these improvements

arenot accidentally eroded over

time.We have further utilised and

developed the Astra tool that we

open-sourced tofacilitate larger

scalecode reorganisation across

ourcodebase. This, along with our

newSDLC that hasbeen incrementally

improved, hasmeant that our

engineers are benefiting from quicker

feedback on their development cycles

and fewer conflicts with other teams

asareas are further de-coupled.

Teamshave also been taking up the

code analysis dashboards that have

been developed in order to highlight

and work on the boundaries and

interactions for their features,

andourteam has been developing

engineer-focused toolsthat will help

embed these activities into teams

business-as-usualoperation.

Strategic report

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Synergise

Subscription Partnership

Developing a mobility solution requires

more than the ability to manage an

asset,contract and customer. It requires

additional functionality to track assets

over time, as they move between

customers and locations; and to track

thecustomer over time, as they switch

between assets. JRNY, Tomorrow’s

Journey’s SaaS platform, is purpose-built

for subscription and usage-based

mobility. By integrating JRNY with the

AlfaSystems platform, those powerful

capabilities are married with additional

functionality, creating an end-to-end,

enterprise-level proposition for captive

and independent finance companies.

Andrew Denton, CEO of Alfa, said:

“Tomorrow’s Journey have been leading

the way in this space for a number of

years. For Alfa, partnering with them on

this new way of modelling subscription

contracts is the logical next step,

providing customers with a truly managed

service and ourselves with a strategic

opportunity that could put both parties at

the forefront of the industry. We already

have sales opportunities that require both

systems – whether that’s an Alfa client

looking to onboard subscription, or aTJ

client looking for the back-office functions

to support their operations.”

Chris Kirby, CEO of Tomorrow’s Journey,

said: “Inthe last 18 months we have

helped many traditional and new

businesses in the automotive sector to

launch and scale usage-based products,

and the demand in the market is greater

than ever. In the shift from traditional,

transactional products like leasing and

PCP to membership-based products like

subscription, the asset and accounting

practices are being underpinned by

leasestructure. We’re delighted to have

partnered with Alfa, who have the leading

product in the sector, and we’re excited

about the opportunities this brings to our

new and existing customers.”

new partnerships in various geographies

that can help us in sales opportunities. We

have continued to invest in partner training,

further developing our training program

including course material improvements

and a new technical training course for

certifying SI partners. Access to additional

resources mean that our partners have

better access to supporting information

and tooling, bringing increased efficiencies.

We have also progressed our planning for

moving to more advanced partner sales

and delivery models, identifying a timetable

for enabling investment.

Plans

In 2023, we will continue to scale our

existing partnerships and evaluate other

potential partners to further strengthen

our partner ecosystem and core market

coverage. This will include expanding our

partner assisted delivery capability in North

America to increase operational capacity.

As staff augmentation partnerships mature

and partner resources gain expert Alfa

Systems implementation knowledge and

experience, we plan to advance them

towards a joint delivery model. In

preparation for this, next year we will

continue to make significant investment

inour partner programme including:

• Improving partner onboarding, including

implementation of a Learning

Management System for managing

training course scheduling, materials

andresource certification;

• Improving partner collaboration tooling;

• Opening up more roles for partners;

• Extending our partner support team.

We will continue sales collaboration

activities with our partners. This 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.

Highlights

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.

This year we have successfully scaled our

partner relationships, remotely onboarding

partner intakes and embedding more

partners in our project teams and sales

activities as well as in client-side/SI roles.

This year we have benefited from increased

sales channel opportunities via our partner

relationships and the extended global reach

and credibility they provide.

We have grown our partner ecosystem,

agreeing engagement terms with ITDS and

aglobal professional services company,

strengthening our delivery capacity in

Europe and the US respectively, and with

Tomorrow’s Journey, a best of breed

technology partnership in the subscription

space. We have also continued to explore

partner

relationships

ongoing partner

assisted projects

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Start

Portfolio Load

Simplification is one of Alfa’s key

corporate strategies for 2022. We had

an objective to review Alfa’s migration

solutions determining where

improvements and simplifications

could occur.

An area of focus was for our Alfa

Startcustomers, who require an

out-of-the-box, quick to implement

self-sufficient solution.

Additionally, several existing

customers have considered purchasing

new portfolios which require loading

into Alfa Systems. This often requires

aquick turnaround from acquiring the

portfolio to loading and maintaining

itin Alfa Systems.

Alfa has various migration solutions,

including the Alfa Migration Suite, which

has been used to migrate a range of

portfolios across the globe. However,

we wished to explore an alternative

solution capable of migrating portfolios

quickly for Alfa Start customers and for

portfolio acquisitions.

A new tool was developed called

thePortfolio Load; an end-to-end,

out-of-the-box solution that uploads

third party information (i.e. customers,

suppliers etc.), agreements and assets

via Microsoft Excel files. The Portfolio

Load stages and loads these entities

into Alfa Systems and pre-configured

reports are available to reconcile all the

information. Utilising Alfa Systems’ rich

workflow functionality, the loaded

proposals are activated along with

finalising key cutover processes. This is

supported by detailed documentation

to enable self-sufficiency for customers.

An Alfa Start customer due to go-live

inQ1 2023 will be the first customer

tomigrate their existing portfolio into

Alfa Systems using the Portfolio Load.

Some of our existing customers

havealso expressed interest in this

new offering.

Highlights

With a continued focus on Alfa Start as one

of Alfa’s strategic priorities, a number of

2022 innovation and investment initiatives

have expanded Alfa Start’s functional

coverage and delivery capabilities. One

such initiative has been the Portfolio Load

which allows legacy portfolios to be quickly

and efficiently migrated onto Alfa Systems.

Another has refined the configuration of

our credit extracts in the US to align with

the latest simplified guidelines from the

Credit Reporting Resource Guide.

We have also broadened the originations

support through integration to an external

credit decisioning engine as part of the new

business process. In addition, the business

process catalogues for Alfa Start continue

to grow, introducing more core Alfa Systems

functionality and out-of-the-box integration

capabilities to enable clients to increase

automation within their operations.

The global Alfa Start user group has

expanded, empowering customers to

continuously improve and develop their

business. This continuous improvement

ofthe product sees our project teams

feedback their learnings from the field

onaregular basis and is complemented

bytargeted internal investment initiatives

aimed at driving forward the Start strategic

initiative. Similarly, dedicated teams ensure

the Alfa Start product remains feature rich

via regular upgrades to the latest version

ofAlfa Systems.

Plans

In 2023 and beyond we will continue to

explore use cases for expanding the ways in

which Alfa Start can be utilised in all stages

of the project lifecycle. Investigating the

potential opportunities in further markets,

such as Europe, Canada, and Australia, will

be a focus.

In order to optimise implementation

timelines, Alfa Start’s pre-configuration

anddocumentation is complemented with

several out of the box integrations reducing

the need for clients or system integrators

tobuild them from scratch. In 2023, Alfa

willcontinue to develop partnerships with

software vendors to increase the number

ofintegrations offered as part of the

Startpackage.

Furthermore, Alfa continues to monitor

market trends and work with clients to help

develop and support new products and

services within the industry, with a view to

incorporating these into our Start offerings.

Recent trends include mobility and

pay-per-use, subscription products,

bifurcation of assets such as EV and

battery, as well as other forms of

sustainable financing.

Alfa Start implementations can reach live

production in as little as

20weeks 31

Strategic report

Corporate governance Financial statements Other information

2022 2021 2020

382

360

441

2022 2021 2020

87%

93%

90%

2022 2021 2020

78%

74%

84%

KPIs

Alfa measures a

range of financial and

operational metrics to

help manage business

performance.

Our strategic priorities

Strengthen

Simplify

Sell

Synergise

Scale

Start

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.

(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.

(4) Employee engagement The overall Employee

engagement score is derived from quarterly

employee Pulse survey ratings based on the

questions “I am happy in my role” and “I would

recommend Alfa to a friend as an employer”.

(5) Operatingfreecashflowconversion

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.

Operational

2022 performance

Headcount has increased due to planned

recruitment and an improved employee

retention rate throughout 2022.

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:

Links to strategic priorities:

2022 performance

The retention rate has improved reflecting the

investment made in learning and development

initiatives and improved employee engagement

scores this year, as well as a return towards

pre-pandemic levels of attrition.

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.

Linked to remuneration:

Links to strategic priorities:

2022 performance

Employee engagement improved this year with

continued focus on internal communications

and face-to-face engagement, creating

opportunities for teams to come together post

pandemic, and supporting our communities.

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:

Links to strategic priorities:

Headcount

441

Retention rate (%)

90%

Employee engagement (%)

84%

Greenhouse gas emissions

As part of our drive to continuously improve our

emissions reporting, we have voluntarily disclosed

new emissions categories in both 2021 and 2022

(refer to page 67) and expect to disclose additional

categories in the future. These improvements

mean that year-on-year comparison would be

misleading (as the prior year numbers would not

include emissions for the new categories) and we

have therefore not disclosed Greenhouse Gas

Emissions as a KPI this year. This is consistent

withour management reporting.

Refer to page 67 for more information on

our emissions data, and page 64-66 for

ourrelatedTCFDdisclosures.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

83.2

78.9

2022 2021 2020

93.3

30%

2022

2021 2020

32%

24.7

23.9

2022 2021 2020

29.6

23.1

37.0

2022

2021 2020

18.7

114%

2022 2021 2020

102%

133.1

112.9

2022 2021 2020

142.9

Financial

2022 performance

Group revenue grew by 12%, with strong

growth in our Software and Subscription

streams driven by more enhancement

development work as well as increases

inpostgo-live support.

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 market-leading People,

Product and Delivery.

Linked to remuneration:

Yes

Links to strategic priorities:

2022 performance

Operating profit margin improved over last

year due to favourable foreign exchange and

one-off gain on lease assignment noted above.

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:

2022 performance

Operating profit increased as a result of growth

in revenues, partially offset by increased

employment costs, with a boost from one off

gains on lease assignment as well as favourable

foreign exchange movements.

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:

2022 performance

Cash generated from operations remained

strong in 2022 with over 100% cash conversion,

allowing for the payment of further special

dividends totalling £19.2m which reduced the

Group’s cash balance.

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:

Group revenue (£m)

£93.3m

Operating profit margin (%)

32%

Operating profit (£m)

£29.6m

Cash (£m)

£18.7m

Operating free cash flow

conversion (%)

2022 performance

Operating free cash flow conversion declined

year on year although remaining over 100%,

due to a lower level of one-off licence fees

received, our planned move towards

asubscription model and increased

capitalexpenditure.

Why do we measure this?

A strong 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:

2022 performance

TCV has seen strong growth particularly within

our software and subscription streams.

Services TCV has declined year on year as a

result of the loss of one implementation

customer during 2022.

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p35formoredetails.

Linked to remuneration:

Links to strategic priorities:

Total contract value (TCV) (£m)

£142.9m

102%

Strategic report

Corporate governance Financial statements Other information

Financial review

“We delivered a very strong financial

performance in 2022, with revenue up 12%,

operating profit up 20% and EPS up 27%,

and paid dividends of £22.5m.”

——— Duncan Magrath, Chief Financial Officer

Financial results

2022 2021

Movement

Revenue 93.3 83.2 12%

Operating

profit

29.6 24.7 20%

Profit

beforetax

28.9 23.8 21%

Taxation (4.4) (4.6) (4)%

Profit for

theperiod

24.5 19.2 28%

Basic EPS 8.24p 6.49p 27%

Diluted EPS 8.09p 6.39p 27%

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Revenues increased by 12% or £10.1m

to£93.3m in the 12 months ending

31December 2022 (2021: £83.2m). Growth

at constant currency was 8%.

Operating profit increased by £4.9m to

£29.6m (2021: £24.7m), due to the £10.1m

increase in revenues, partially offset by

£5.2m increase in net expenses, principally

due to a £5.7m increase in staff and partner

employment costs. This included salary

costs up 11% with average headcount up

10% along with £1.0m increase in partner

costs. This was partially offset by a one-off

gain on a lease assignment of £0.6m and

transaction FX gains of £1.1m.

Net finance costs which relate to leases

expense of £0.6m (2021: £0.8m) resulted in

profit before tax of £28.9m (2021: £23.8m).

The Effective Tax Rate (ETR) for 2022 is

15.2% (2021: 19.3%) due to some favourable

prior year items, including R&D tax credits.

The resulting profit for the period was

£24.5m (2021: £19.2m).

Revenue

Revenue – by type

£m 2022 2021

Movement

Subscription 27.4 23.5 17%

Software 16.3 13.6 20%

Services 49.6 46.1 8%

Total revenue 93.3 83.2 12%

Subscription revenues

Overall subscription revenues increased

17% to £27.4m (2021: £23.5m). The

increasewas driven by a 15% increase in

maintenance revenues boosted by a 28%

increase in hosting revenues, principally

due to v4 customers moving onto hosting

for their v5 implementations, alongwith two

new customers, one which has gone live and

one which is in the implementation phase.

Software revenues

Software revenues of £16.3m were up

£2.7mor 20% on last year (2021: £13.6m)

onthe back of strong development

revenues for both existing and new

customers, which were up 64% on last year.

In 2022 we saw acontinuation of upgrades

to v5 from older versions of the software,

which generally do not attract additional

licence payments, except where customers

purchaseadditional modules. Customised

licence revenues were up 13% on last year

due to the extra development days. One-off

licence fees in theyear were £0.4m down

£1.7m on the £2.1m in 2021.

Services revenues

Services revenue increased overall by 8%

to£49.6m (2021: £46.1m) at actual exchange

rates. Implementation revenues for new

customers were down 16% , as more of our

team was focused on work for v5 upgrades.

As a consequence we saw services work

forexisting customers increase by 25%.

Theongoing services work for existing

customers, including v5 upgrades, was

66%of services revenue in the year.

Total contract value (TCV)

TCV – by stream

£m 2022 2021

Movement

Subscription 93.3 85.8 9%

Software 20.1 14.9 35%

Services 29.5 32.4 (9)%

Total TCV 142.9 133.1 8%

Total contract value (TCV) increased over

last year by 7% to £142.9m reflecting net

new contracts signed in the year, along with

the impact of increasing our own prices.

Subscription TCV has increased 9% driven

by an increase in the number of customers

and the significant growth in our hosting

business. There was also a 35% increase

inSoftware, principally from an increase

incontracted development work. Services

TCV of £29.5m was down 9% versus this

time last year due to the timing of the

signing ofstatements ofwork.

TCV – by stream

for next 2 months

£m 2022 2021

Movement

Subscription 30.1 26.9 12%

Software 10.2 6.7 52%

Services 24.7 26.2 (6)%

Total TCV 65.0 59.8 9%

Of the TCV at 31 December 2022, £65.0m

(31 Dec 2021: £59.8m) is anticipated to

convert into revenue within the next 12

months, assuming contracts continue as

expected and are not cancelled or delayed.

This includes £10.2m (2021: £6.7m) of

Software revenues, £30.1m (2021: £26.9m)

of Subscription revenues and £24.7m

(2021:£26.2m) of Services revenues.

Operating profit

The Group’s operating profit increased

strongly, up by 20% or £4.9m, to £29.6m

(2021: £24.7m) primarily reflecting the £10.1m

increase in revenues, partially offset by an

increase in the Group’s cost base as we

continued to invest in the business, and

through increased headcount

andpartnercosts.

Headcount numbers were up 16% at

31December 2022 at 441 (31 Dec 2021: 382),

however following the slower recruitment

atthe start of the year average headcount

was up only 10% to 420 (2021: 383). Our

staff retention rate in 2022 was strong at

90% (2021: 87%).

Expenses – net

£m 2022 2021

Movement

Cost of sales 33.4 29.0 15%

Sales, general

and admin

expenses

31.0 30.0 3%

Other income (0.7) (0.5) 40%

Totalexpenses

– net

63.7 58.5 9%

Strategic report

Corporate governance Financial statements Other information

Cost of sales increased by £4.4m to £33.4m

(2021: £29.0m) due to higher salary costs

from the increase in customer facing

headcount along with increased hosting

costs, and partner costs where days were

up58% over last year.

Sales, general and administrative (SG&A)

expenses increased by £1.0m to £31.0m

inthe year (2021: £30.0m). This included

increased salary costs through higher

headcount. In addition Profit Share Pay

increased to £3.5m (2021: £3.1m) and

share-based payment charges increased to

£1.8m (2021: £1.5m). Travel and conference

costs were up versus prior year, dueto

apick-up in travel in the second halfas

activity started to return back post-

COVIDlockdowns.

Two gains, totalling £1.7m offset

theincreases noted above. Firstly a gain

of£0.6m on a lease assignment. A lasting

impact of COVID has been the introduction

of our smart working policy which

prompted a review of the space that we

need in our London office. We concluded

that we did not need all the space, and so

we assigned the remaining part of the lease

on one floor, which crystallised a book gain

as the related lease liability was in excess of

the right to use asset value. There was also

a gain of £1.1m in foreign currency

differences (2021: loss (£(0.2)m).

Finance costs

Net finance costs which relate to leases of

£0.6m (2021: £0.8m) reduced slightly due to

the assignment of part of the London office

space noted above. The Group had no

external bank borrowings in either 2022

or2021.

Profit for the period

Profit after taxation increased by £5.3m,

or28%, to £24.5m in 2022 (2021: £19.2m).

The Effective Tax Rate (ETR) for 2022 is

15.2% (2021: 19.3%), which benefited from

£1.3m of prior year items, with the major

component of this being due to R&D

taxcredits.

Earnings per share

Basic earnings per share increased by 27%

to 8.24 pence in 2022 (2021: 6.49 pence).

Diluted earnings per share increased by

27% to 8.09 pence (2021: 6.39 pence).

Cash flow

Cash (including the effect of exchange rate

changes) decreased by £4.4m to £18.7m

at31December 2022, from £23.1m at

31December 2021. This decrease has

beendriven by strong cash generation

fromoperations, offset by the payment of

special and regular dividends of £22.5m (2021:

£32.7m) and purchases of own shares for the

Employee Benefit Trust and through the Share

buyback programme of £5.6m (2021: £4.6m).

Operating free cash flow

conversion

£m 2022 2021

Cash generated from

operations 34.0 31.3

Adjusted for:

Capitalexpenditure (2.3) (1.3)

Principal element of

theleasepayments

inrespectofIFRS16 (1.6) (1.9)

Operatingfreecashflow 30.1 28.1

Operating profit 29.6 24.7

Operating free cash

flowconversion 102% 114%

The Group’s Operating Free Cash Flow

Conversion (FCF) of 102% (2021: 114%)

wasbelow the very strong performance

lastyear and closer to our 100%

conversionexpectation as we move

toasubscription model.

In addition to the cash generated from

operations of £34.0m, the Group incurred

£2.3m on capital expenditure (2021: £1.3m)

and made net tax payments of £6.2m (2021:

£3.8m ). Tax payments increased on last

year as we moved into the HMRC large

company tax category, with all estimated

tax paid within the year.

In the year, net cash outflows of £29.7m

(2021: £39.2m) from financing activities

related to the principal element of lease

payments of £1.6m (2021: £1.9m) and

purchase of own shares of £5.6m

(2021:£4.6m). The biggest cash outflow

related to dividends, with ordinary dividends

of £3.3m (2021: £3.0m) paid in year along

with Special Dividends of £19.2m (2021:

£29.7m). Since November 2020, total

dividends of £100m have been paid.

Balance sheet

In the year, the two significant movements

in the balance sheet have been the

movement in cash explained above, and

areduction in the right-of-use assets of

£7.3m andlease liabilities of £7.8m

principally dueto assigning a lease on one

floor of theLondon office.

Other balance sheet movements were

asfollows:

Current assets at year end were £39.0m

(2021: £39.6m). Trade receivables grew on

the back of the growth in the business to

£8.9m (2021: £6.0m) however they continue

to remain well controlled with total

receivables of only £0.1m (2021: £0.7m)

more than 30 days overdue. Provision

forimpairment remains nil (2021: £nil).

Accrued income increased slightly

intheyear to £6.5m (2021: £6.3m)

withprepayments increasing to £4.5m

(2021:£3.2m) due to deferred costs (offset

by a related increase in deferred licence

contract liabilities).

Financial review continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

“Average headcount

in the period of 420 (2021: 383)

was a 10% increase on last year.

Our strong pipeline enabled us

to remain chargeable through

the year. Our team retention

improved during the year

resulting in retention of 90%

(2021: 87%) for the year as a

whole. Also pleasing was our

employee engagement, which

isnow at 84%, a record level.”

Current liabilities of £25.6m (2021: £24.0m)

were up £1.6m. Trade payables and other

payables were largely unchanged at £9.5m

(2021: £9.3m). There was no Corporation Tax

liability at year end (2021: £1.8m) due toAlfa

moving into the UK HMRC large company

regime so that all estimated tax ispaid within

the year. Contract liabilities increased by

£3.8m to £14.8m (2021: £11.0m) with

deferred licence liabilities increasing £3.3m

to £8.6m (2021: £5.3m) due to an increase

in the material right related to customised

licence implementations, along with an

increase indeferred maintenance liabilities

up £0.5mto £6.2m (2021: £5.7m) from

growthinthebusiness.

Non-current liabilities reduced significantly,

down £7.7m to £8.9m (2021: £16.6m) due

toa reduction in lease liabilities to £8.0m

(2021: £15.0m) with provisions decreasing

to£0.9m (2021: £1.4m).

Capital allocation

anddistributions

The Group has had strong cash generation

over a number of years and we expect this

to continue. The Group’s capital allocation

policy takes into consideration the need

tocontinue to invest in our people and

technology whilst maintaining strong

liquidity at the same time.

The first post IPO dividends were paid

inNovember 2020 and in January 2022

wealso announced a share buyback

programme of up to £18m over the next

18months.

The Board intends to progressively increase

the ordinary dividend as the Group grows,

whilst ensuring that we retain a strong

balance sheet.

For 2022 we are proposing an ordinary

dividend of 1.2 pence per share, amounting

to c£3.6m with an ex-dividend date of 25

May 2023. In addition we have declared

aSpecial dividend of 1.5 pence per share,

amounting to c£4.4m with an ex-dividend

date of 13 April 2023.

Subsequent events

There have been no reportable

subsequentevents since the balance

sheetdate, other than the continuation

ofthe share buyback programme.

Related parties

Details about related party transactions

aredisclosed in note 32.

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, 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 over

futureeconomic conditions, 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 is set out in

theStrategic report on pages 46 to 47.

Duncan Magrath

Chief Financial Officer

1 March 2023

Strategic report

Corporate governance Financial statements Other information

Risk management

Our aim is to foster a culture of

effective risk management where innovation

isencouraged, and is backed up by appropriate

assessment and monitoring of risks.

Introduction

2022 saw a variety of significant risks and

uncertainties develop over the year, most

notably the global economic uncertainty

influenced by the lingering impacts of the

COVID-19 pandemic, the start of the war in

Ukraine, and the period of political upheaval

in the UK. Cyber security and information

security have also continued to be high

priority topics at the heart of our proactive

risk management approach.

We continue to apply our risk management

framework to monitor, mitigate and adapt

to continuing and emergent risks and

uncertainties that we face, such as the

above. By integrating risk management into

our strategic thinking, we prepare ourselves

to be as resilient as possible in the face of

uncertainty, and to remain focused on our

long-term objectives.

We are very conscious of our responsibility

towards society, and as such ESG-related

risks are included in our risk management

activities. We consider how topics such

asclimate change will impact our industry,

but also consider our responsibilities and

the sustainability of our activities.

Risk management is integral

to our strategic objectives

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 where innovation

isencouraged, and is backed up by

appropriate assessment and monitoring

ofrisks, in order to achieve the Group’s

strategic priorities.

Our strategic priorities as set out on pages

22 to 31, are to:

• Strengthen – Grow our differentiation

ofmarket-leading People, Product

andDelivery.

• Sell – Focus on cloud-hosted,

subscription sales to our target markets.

• Scale – Increase our capacity for

developing and delivering Alfa Systems.

• Simplify – Simplifying our product,

implementations and processes

toenable more concurrent Alfa

Systemsimplementations.

• Synergise – Develop our partner

ecosystem, to improve our sales

opportunities and to enable more

concurrent Alfa Systems implementations.

• Start – Improve our offering for smaller

asset finance providers as a platform for

innovation and to increase our reach.

How we monitor risk

Identify risks

Define risk

appetite

Assess and

quantify

Respond, manage

and mitigate

Monitor

and review

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

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

2022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.

Whilst overall responsibility for risk lies at the Board level, the Directors have

delegated authority for risk identification to the Company Leadership Team (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.

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.

Risks are assessed to understand the likelihood and the impact of the risk crystallising.

We assess risk across all of our business areas, and we analyse their impact across

these categories:

• Financial

• Operational

• Reputational

• Legal and regulatory

Each risk is reviewed at least annually, bi-annually for the higher priority risks. 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 the business owner is responsible for

implementing changes.

Management monitors progress against the principal risks. This is shared with our

internal auditor, BDO, to assist with forming the internal audit plan for 2023. 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.

How we monitor risk

Strategic report

Corporate governance Financial statements Other information

Risk management continued

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, or their delegates, 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, as they are 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 SOC1 and SOC2 audits.

Responsibilities

Board

• Defines the risk governance framework,

risk culture and principles

• Responsible for an effective system

ofinternal controls

• Sets the tone for risk management

including risk appetite

• Approves risk decisions that are beyond

delegated authorities

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

• 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the 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

Risk Officer and CFO Operational management

• 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

• Assesses for new risks, updates

oncurrent risks assessment and

implements mitigation strategies

andactions

All employees

• Be alert to risks associated with the

activities that they perform

• Report inefficient, unnecessary or

unworkable controls

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Principal risks and uncertainties

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 June 2022,

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 be

expected to put the business at risk of

significant financial, operational or reputational

damage. It is recognised that an element of risk

taking is necessary in order to seek out and

pursue opportunities, including progressing

our strategic objectives. Nevertheless, the

risks associated with the pursuit of such

opportunities should be commensurate

withthe level of reward expected from

theopportunities. At the current time of

heightened geo-political risk, we recognise

thatthis risk is currently showing outside

ofour acceptable risk appetite range. We

consider this heightened risk to be temporary

and somewhat outside of our control, but

wecontinue to monitor whether there are

furtheractions we can take to mitigate this

riskwhilst it remains at an elevated level.

Principal risk analysis (including mitigating activities)

• Continuous improvement of risk

management procedures, including

raising 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, progress

SOC1 Type 2 certification, and

continue to assess and strengthen

our cyber security defences.

• Business continuity and disaster

recovery scenario testing exercises.

• Internal audits – reviews of the

strength and effectiveness of our

financial and IT controls.

Environment, Social and

Governance (ESG) risk

assessment

As part of our detailed risk review in

mid2022, and subsequent updates at the

end of 2022, we included specific focus on

ESG related risks, which are tracked within

our Corporate Risk Register. We do not

currently have any ESG related risks that

are sufficiently high to be considered

principal risks or uncertainties.

Refer to pages 64 to 66 (Task Force on

Climate-Related Financial Disclosures)

which discusses specific risks related to

ourclimate change responsibilities.

We will continue to risk assess this area as

we progress our ESG objectives in 2023.

Focus for 2023

Risks

Socio-economic and

geo-political risk

Risk to people, teams and skills

IT security and cyber risks

Business interruption or continuity

Foreign exchange rate uncertainty

Pressure on margin due to

increased cost base, or through

increased competition

Acceptable risk appetite

AB E F

Impact

Probability

Strategic report

Corporate governance Financial statements Other information

Principal risks and uncertainties continued

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.

Risk A – Socio-economic and geo-political risk

Link to strategic

priorities

How does it impact us?

We continue to face uncertainty in the global

economic outlook, which may impact demand

forourservices in one or more of our regions.

Thecurrent major components of this risk are:

• There is a risk of recession (global or local) in the

aftermath of the COVID-19 pandemic, coupled with

the impacts of the war in Ukraine. Alfa does not have

customers nor staff in Ukraine or Russia, and so our

business is not directly impacted. However, potential

economic impacts on our customers and their

markets may reduce their spend on our services.

• Inflation has increased in each of our regions, due

tothe above factors, and is leading to increased costs

to our business. These increases may outpace our

revenue increases, if we are unable to increase our

fees in line with costs.

• Reduced consumer confidence in a period of

recession and higher inflation may lead to reduced

demand for consumer asset finance, and therefore

aknock-on reduced demand for our services.

The above external factors have led to us assessing this

risk as remaining at its previous level. The following

elements of this risk have reduced, however:

• The impacts of Brexit on our business have been

minimal. There is some residual risk due to more

difficult trading relationships between the EU and

theUK, which may impact our ability to service

customers in the EU. We have not experienced

significant impacts to date, and our established

EUpresence mitigates against this.

What are we doing to manage the risk?

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.

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 auto and equipment finance industry.

The percentage of our revenue concentrated in our

largest customers has reduced significantly in 2022,

asa result of our strategy to diversify. This has led to

the High Customer Concentration risk from the 2021

annual report being reduced, to the level where it is

nolonger a principal risk in this report.

We ensure that the Group is financially robust and

resilient to economic downturns, or project pauses,

byretaining cash reserves and invoicing and collecting

promptly for services.

We take proactive steps to maintain strong

relationships with our customers in each market,

withclose collaboration on strategic aims and growth

opportunities. This helps us to be resilient and adapt

to changing market conditions.

Our fees for services are generally increased annually,

taking consideration of the increases experienced in

our cost base.

Movement

Same level of risk

Potential impact

Major

Probability

Likely

Our strategic priorities

Strengthen – Grow our differentiation

of market-leading People, Product

andDelivery.

Simplify – Simplifying our product,

implementations and processes

toenablemore concurrent Alfa

Systemsimplementations.

Sell – Focus on cloud-hosted,

subscription sales to our

targetmarkets.

Synergise – Develop our partner

ecosystem, to improve our sales

opportunities and to enable more

concurrent Alfa Systems implementations.

Scale – Increase our capacity

fordeveloping and delivering

AlfaSystems.

Start – Improve our offering for

smaller autoand equipment finance

providers as aplatform forinnovation

and to increase ourreach.

2 3

5 6

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Risk B – Risk to people, teams and skills

Link to strategic

priorities

How does it impact us?

We are a people-centric organisation, with our success

heavily dependent on keeping the right culture, skills

and teams in place to execute our strategy.

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, and to manage

customer relations. This would impact our ability to

deliver on our strategic plan.

We continue to see high competition in recruitment

markets, particularly in the technology sector,

although this has reduced somewhat from peak levels.

As such, this risk remains at the same level as previously,

but there are elements of it that have receded:

• 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 element of the risk has receded somewhat,

as we have significant experience in operating

projects with both a remote component, and with

partners fulfilling certain on-site roles.

• The risk posed to the health and wellbeing of our

staff by COVID-19 has significantly reduced. We

remain vigilant against the possibility of surges in the

infection rates, but the risk posed by this is no longer

at the level of our principal risks.

What are we doing to manage the risk?

Recruitment of graduates and experienced hires is

continuing across all of our regions, with dedicated HR

staff 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, with

extensive and 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.

Our diligent onboarding process, with role-specific

training, gives our new joiners the knowledge to help

them to succeed. This important training regime is

asignificant time commitment, and does increase

onboarding time for our employees, but the benefits

justify this. We have rolled out a new learning and

development software platform in 2022, further

strengthening our toolset for employee growth.

We endeavour to maintain a culture centred around our

principles and values, and we have a strong focus on

employee satisfaction, wellbeing and engagement. This

has been recognised by our fourth place ranking in

Newsweek’s UK Top 100 Most Loved Workplaces list.

Employee engagement surveys are carried out every

quarter, and allow areas for improvement to be

identified and acted upon.

We have continued to show success in having high

employee retention figures in 2022.

We benchmark our remuneration levels against

relevant roles in the industry and aim to be competitive.

Movement

Same level of risk

Potential impact

Moderate

Probability

Likely

Strategic report

Corporate governance Financial statements Other information

Principal risks and uncertainties continued

Risk C – IT security and cyber risks

Link to strategic

priorities

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.

There is a continuing global trend of cyber attacks

against IT companies, including large-scale,

sophisticated and coordinated attacks.

Insurance providers are reducing their cyber

insurance coverage in general, in response to the

increased risk of attacks on organisations. This

reduces the mitigation that can be achieved through

insurance, in the event of an attack.

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 have strengthened our security

teamin2022 with recruitment of additional

qualifiedspecialists.

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 2022. We have also achieved

SOC1 Type 1 accreditation, and have plans for SOC1

Type 2 accreditation in coming years, providing

additional assurance around our controls.

We have continuity plans for our Alfa Hosting services,

where we use third party cloud hosting suppliers,

including transferring our customers’ data to a

similarsupported environment should the services

beunavailable.

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.

Movement

Same level of risk

Potential impact

Major

Probability

Possible

Our strategic priorities

Strengthen – Grow our differentiation

of market-leading People, Product

andDelivery.

Simplify – Simplifying our product,

implementations and processes

toenablemore concurrent Alfa

Systemsimplementations.

Sell – Focus on cloud-hosted,

subscription sales to our

targetmarkets.

Synergise – Develop our partner

ecosystem, to improve our sales

opportunities and to enable more

concurrent Alfa Systems implementations.

Scale – Increase our capacity

fordeveloping and delivering

AlfaSystems.

Start – Improve our offering for

smaller autoand equipment finance

providers as aplatform forinnovation

and to increase ourreach.

2 3

5 6

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Risk D – Business interruption or continuity

Link to strategic

priorities

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, we do not have access

to our office space, or if significant numbers of our

personnel are unavailable.

A failure to be able to use key IT systems or access

ourinfrastructure could lead to a failure to deliver

ourservices (particularly urgent maintenance services

in the event of a disaster) to our customers and

therefore have a negative reputational impact.

This risk includes consideration of future pandemics,

or a significant resurgence of the COVID-19 case rates.

This element of the risk has receded significantly,

however, and is not at the level to be considered a

principal risk.

An emergent risk in this area is of power outages,

dueto shortages in energy supply chains, for example

in the UK. We have assessed the impact of this on our

business operations, and consider it to be a low risk,

since the power outages would likely be short, and

regional, with limited impact on our operations.

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. This

includes an impact analysis exercise, which identifies

key systems, and assigns clear ownership of each of

those systems and their business continuity plans.

Our SOC2 Type 2 reporting and complete failover

testing has identified no significant required remedial

actions. In addition, an audit was performed by our

internal auditors (BDO) in early 2022, of our business

continuity procedures, providing additional assurance.

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.

We have a geographically distributed workforce, and

the majority of our key systems are cloud hosted,

providing resilience against an event impacting one

particular location.

Movement

Same level of risk

Potential impact

Major

Probability

Unlikely

Risk E – Currency exchange rate uncertainty

Link to strategic

priorities

How does it impact us?

There has been considerable fluctuation and volatility

in currency exchange rates throughout 2022, notably

the weakening of the British Pound relative to the

USDollar and Euro until September, as a result of

factors such as those listed in Risk A – Socio-economic

andgeo-political risk. Whilst the British Pound

hasregained some of its value since then, there is

ariskofcontinued volatility in 2023.

As we expand our operations, for example in the EU,

our exposure to currency volatility increases.

What are we doing to manage the risk?

Our spread of revenue and costs across different

regions, and currencies, provides a degree of natural

hedging against volatility.

We closely monitor exchange rates, and take

appropriate action, such as converting excess funds

toSterling, and entering into forward contracts to

hedge against short-term risk. Such monitoring is also

incorporated into our budget forecasting process.

Movement

Increased

probability

Potential impact

Moderate

Probability

Likely

Risk F – Pressure on margin due to increased cost base, or through increased competition

Link to strategic

priorities

How does it impact us?

The current high inflation environment, coupled withthe

competition we have seen reflected in benchmarked

salaries in the technology industry, lead to an increased

cost base across all of our regions.

We may also see competitors offer similar services at

lower rates, forcing us to reduce revenue in order to

remain competitive.

Without appropriate mitigation these would reduce

our margins.

What are we doing to manage the risk?

Our fees for services are generally increased annually,

taking consideration of the increases experienced in

our cost base.

Our Deal Committee has oversight of our pricing policy,

making sure that our pricing is correctly targeted.

Our strategy is to maintain and grow our

differentiation of market-leading people, product and

delivery, and these set us aside from our competitors,

making us a compelling choice to ensure success in

the kind of complex technology transformation

projects where we operate.

Our Start and Simplification objectives are targeting

more efficient implementations, further strengthening

our competitiveness.

Movement

Increased

probability

Potential impact

Moderate

Probability

Likely

Strategic report

Corporate governance Financial statements Other information

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:

• Growing differentiation of market leading

People, Product, Delivery;

• Focusing on cloud-hosted subscription

salesto our target markets;

• Increasing our capacity for developing

and delivering Alfa Systems

• Simplifying our product, implementations

and processes to enable more

concurrent Alfa implementations, more

efficiently, with a higher margin;

• Developing partner ecosystem, to

improve sales opportunities and enable

more concurrent Alfa implementations;

and

• Improving our offering for smaller asset

finance providers as a platform for

innovation and to increase reach.

During the year ended 31 December 2022,

the Group generated profit before tax of

£28.9m and, excluding the payment

of£19.2m Special Dividends in the year, was

cash-generative with net cash generated

from operating activities amounting

to£34.0m.

Taking into account the Group’s current

position and its principal risks and

uncertainties as described on pages 41

to45 of this Annual Report, the Directors

have assessed the Group’s prospects

andviability.

Assessment period

andprocess

The strategy and business model as set out

on pages 20 to 31 and 18 to 19 are central

to an understanding of its 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:

• It reflects reasonable expectations in

terms of the reliability and accuracy of

operational forecasting models; and

• 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.

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 from being delivered.

Detailed financial forecasts which include

profit, cash flow and key financial ratios

have been prepared for the three-year

period to December 2025.

The first year of the financial forecasts

forms the Group’s 2023 budget 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,

as described in principal risks and

uncertainties on pages 41 to 45.

The Board has considered the Group’s

financial performance in 2022, and the risk

factors noted above, and considers that the

key risks which could have a major impact

the delivery of the Group’s financial

objectives are as follows:

• Socio-economic or geopolitical

risksimpacting conversion of the

salespipeline and/or spending

byexistingcustomers;

• Risks to people, teams and skills

impacting our capacity to deliver

servicesto customers;

• Currency exchange rate uncertainty; and

• Pressure on margins due to increased

cost base, or through increased

competition.

Conclusion

It was determined that none of the

individual risks would, in isolation,

compromise the Group’s viability. The

Directors therefore reviewed the outputs

ofthe alternative forecasts 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.

Scenario 2 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.

Viability statement

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Based on the current commercial outlook,

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 the crystallisation of such a

scenario, 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

actions that could be taken to further

minimise the financial impact and maintain

liquidity to continue in operation.

Revenue and profitability are clearly affected

in this alternative scenario. 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 £15.6m

(inScenario 2).

Additionally, further downside stress testing

has been performed which demonstrates

that even in the most extreme downside

conditions considered reasonably possible,

given the existing level of cash held and the

variable nature of the majority of the Group’s

costs, the Group would continue to be able

to meet its obligations as they fall due over

the period of assessment.

Whilst it is acknowledged that there is

continued uncertainty over future economic

conditions, 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 2025.

This scenario assumes significant

reductions in conversion of sales

pipeline and work for existing

customers, with nogrowth in partner

utilisation during theforecast period,

resulting in a 31% reduction from

base case revenues by2025.

Employee retention rates reduced

by10%p.a. resulting in a 24%

reduction inheadcount from

basecase by 2025.

Direct costs relating to partner

usageandcloud hosting services

aresignificantly reduced in line with

customer activity, and the level of

salary inflation, bonuses and profit

share are also reduced.

No other mitigating actions are

required in this scenario, with other

costs remaining in line with the base

case and continued payment of

annual ordinary dividends and

share-buy backs as planned.

This scenario assumes no

conversionof sales pipeline as well

asa substantial loss of customers

including cancellation of two major

ongoing implementation projects

during 2022 and termination by

anumber of existing customers. This

scenario results in a47% reduction

from base case revenues by 2025.

Employee retention declines by

20%from base case in this scenario

but recruitment continues and no

redundancies would be required;

thisresults in a 41% reduction in

headcount from base case by 2025.

Direct costs are reduced further

thanin Scenario 1 as well as

additional reductions in operating

and capital expenditure, in line with

reduced headcount. Continued

payment of annual ordinary

dividends and share-buy backs

asplanned.

Scenario 1: Scenario 2:

Strategic report

Corporate governance Financial statements Other information

Section 172 statement

The Board of Directors of

Alfa hasalways taken decisions

for thelong term, and collectively

andindividually our aim is to uphold

the highest standards ofconduct.

The needs of our stakeholders and the consequences of any

decision in the long term are taken into consideration by the Board

when making decisions. The differing interests of stakeholders are

considered in the business decisions we make across Alfa, at all

levels, and are reinforced by the Board setting the right tone from

the top. In performing their duties during the year, the Directors

have had regard for the matters set out in Section 172(1) of the

Companies Act 2006.

This Annual Report includes examples of how the Directors

haveoversight of stakeholder matters and had regard for

thesewhen making decisions. 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.

Relevant considerations in Board decisions

In performing their duties during the year, the Directors have had

regard for the matters set out in Section 172(1) of the Companies

Act 2006. Examples of how the Directors have oversight of

stakeholder matters and had regard for these matters when

making decisions is included throughout this Annual Report.

Key

s172

consideration Relevant disclosure Pages

The likely

consequences

ofany decision

inthe long term

CEO review

Business model

Key performance indicators

Financial review

Principal risks and uncertainties

Viability statement

Engaging with our stakeholders

Chairman’s governance letter

Board leadership and Company purpose

Board leadership: Board activities

Directors’ Remuneration Report

12 to 15

18 to 19

32 to 33

34 to 37

41 to 45

46 to 47

52 to 53

71 to 73

81 to 82

97 to 120

The interests of

theCompany’s

employees

CEO review

Business model

Key performance indicators

Principal risks and uncertainties

People

Board leadership: Board activities

Directors’ Remuneration Report

12 to 15

18 to 19

32 to 33

41 to 45

58 to 61

97 to 120

The need to

fosterbusiness

relationships

withsuppliers,

customers

andothers

CEO review

Company strategy

Partnering

Key performance indicators

Engaging with our stakeholders

Board leadership: Board activities

12 to 15

22 to 31

32 to 33

52 to 53

The impact of

theCompany’s

operations on the

community and

environment

CEO review

Principal risks and uncertainties

Environmental, Social and Governance

Task Force on Climate-Related Financial

Disclosures

Board leadership: Board activities

12 to 15

41 to 45

54 to 69

64 to 66

The desirability

ofthe Company

maintaining a

reputation for

highstandards of

business conduct

CEO review

Business model

Key performance indicators

Financial review

Principal risks and uncertainties

Engaging with our stakeholders

Chairman’s governance letter

Board leadership and Company purpose

Board leadership: Board activities

12 to 15

18 to 19

32 to 33

34 to 37

41 to 45

52 to 53

71 to 73

81 to 82

Acting fairly

between

members

Engaging with our stakeholders

Board leadership: Board activities

Audit and Risk Committee

52 to 53

90 to 96

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Our approach below sets out how the Board is supported in considering relevant factors that lead to the best course of action and

long-term success of the Company.

Board information and

stakeholder engagement

Board decision

Review and

monitor

Updates and

information on

outcomes of

decisions

Board strategic

discussion and review

Identify priorities

Establishing goals and objectives

Finding resources

Allocating funds to support the

decision to be made

Maintaining high

standards of

businessconduct

The need to foster

business relationships

with customers,

suppliers andothers

Interests of Alfa

employees

Impact of Alfa

operations on the

community and

environment

Likely consequences

of long-term actions

The need to act fairly

between members

ofAlfa

Strategic report

Corporate governance Financial statements Other information

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

The Board operates with consideration for

the duties of the Directors, including the relevant

matters set out in section 172(1)(a)-(f) of the

Companies Act 2006. Specific examples of key

areas of focus and considerations affecting the

Board’s decision-making process during 2022 are

set out below.

Key stakeholder groups

considered

Customers

Communities

Employees

Partners

Shareholders

Section 172 statement continued

s. 172 consideration

Stakeholder

What was the decision?

During 2022, the Board was asked to

consider the establishment ofanew

Software Engineering Hub due to

recruitment demands. Asthe business

continues to grow, expanding and

diversifying ourrecruitment reach is critical

to the ambitions of our strategic objectives.

A review took place to consider jurisdictions

in which we currently reside as well as

alternative locations outside of our existing

footprint. Each location was evaluated in

line with specific criteria, such as integration

to the Alfa culture and ability to work

collaboratively withthe existing employees

and customers. Following this evaluation,

the Board approved the decision that the

new Smart Hub would be established in

Lisbon, Portugal.

Approving a new Smart Hub

inPortugal

How the Board’s engagement

withstakeholders influenced

thedecision

Customers

The establishment of a Smart Hub in

Portugal will complement the existing

Software Engineering teams and ensure

that customers see the increased speed

ofimplementation and a significant benefit

in the reliability of the service.

Employees and communities

Inclusion and diversity remains integral to

Alfa. Assuch, an important consideration

was the political ideology and human

rightspractices of each location. Existing

employees are responsible for establishing

the Alfa culture and developing the

teamappropriately.

Outcomes and impacts

The establishment of the new Smart Hub

inLisbon, Portugal. This provides access

toa diverse population of experienced

developers, with characteristics consistent

with Alfa’s culture and values. This

repeatable model gives us access to

additional talent pools outside our

principalengineering centre in London.

Strategic report

Corporate governance Financial statements Other information

s. 172 consideration

Stakeholder

What was the decision?

During 2022, we reviewed the capital

allocation of the Company, taking into

consideration the need to continue to

invest in our people and technology whilst

maintaining strong liquidity. The Board

discussed the appropriate alignment with

the Group strategy and the consideration

ofour stakeholders. With this in mind, we

announced an 18-month share buyback

programme in January 2022.

Share buyback programme

How the Board’s engagement

withstakeholders influenced

thedecision

Shareholders

Due to the strong financial position and

positive cash balance, the Board considered

the return of capital to shareholders

through the commencement of a share

buyback programme. The future cash

projections were considered to ensure

thatthe Company continued to generate

enough cash for future growth plans and

excess cash be returned to shareholders.

Outcomes and impacts

The ability of the business to manage its

cash position in an effective way is clearly in

the interests of all shareholders. The share

buyback programme is in line with our

strategy for long-term sustainable growth

and delivering value for our shareholders,

and the execution of this strategy will

benefit all members. We have received

positive feedback from shareholders in

relation to the share buyback programme

and the continued capital distribution,

through special and year-end dividends.

Engaging with our stakeholders

The Board is responsible

forleading stakeholder

engagement, ensuring that

wefulfil our obligations.

Our key stakeholders are those

who influence or are affected by

our day-to-day activities, these

stakeholders groups have varying

needs and expectations; our aim

at Alfa is to engage effectively

with all stakeholders, to develop

and maintain positives and

productive relations.

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,

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.

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 CEO is actively engaged with many of

ourkey customers and potential customers.

He provides updates to the Board on key

trends and emerging issues throughout

theyear. As part of the Board strategy session,

the Board reviewed the customer needs and

theextension of Alfa Systems into adjacent

markets that could provide a broader offering

to our existing and future customers.

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

autoand equipment finance industry.

Outcome of engagement

Our customers have direct channels to engage

with all levels of the organisation. Our customers

have realised the importance of a truly digital

environment and the flexibility that this provides

for remote working. This has driven increased

enquiries for new Alfa Systems and also for

further development and hosting services

from existing customers. This hasled to

discussions in the Board as to how use of

partners can help provide a more flexible

quicker response to customer needs.

We continued to build on our long-term

relationships with our customers. This is key to

developing our leading-edge technology and

hosting services, increasing customer loyalty,

which in turnenables us to win newbusiness.

The approval of the new Smart Hub in Portugal

will complement the existing Software

Engineering teams and ensure that customers

see the increased speed of implementation and a

significant benefit in the reliability of the service.

Engagement in 2023

Looking ahead, the Board will oversee that our

systems continue to evolve to meet the needs

of our customers, and that we take advantage of

our leading-edge technology and hosting services.

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.

Listening to our talented employees,

being flexible, supportive and

inclusive, are our routes to growing

and retaining Alfa’s talent pool,

enabling us to deliver against

ourstrategic priorities and

developour people.

How the Board engaged

Employee engagement remains a key priority

for the Board. During the year, Vicky Edwards,

the Chief People Officer, attends Board and

Remuneration Committee meetings to provide

updates on people and talent initiatives.

Matthew White, the COO, updates the Board

with a HR dashboard, highlighting key statistics

and reviewing employee survey results ateach

Board meeting.

In 2022 we continued to hold online events for

employees to provide feedback, hear plans and

make suggestions to the Company Leadership

Team (CLT) and theBoard,. Outside these

forums, feedback is always encouraged and

communication is welcomed by all.

Outcome of engagement

We have a strong culture at Alfa and we are

proud that our people are highly engaged,

supportive of each other and of the

organisation’s aims. We have focused on

keeping colleagues connected with events

andcommunications, enhanced some of our

family-friendly policies and rolled out various

wellbeing and career development initiatives

inresponse to need and the world around

us,balancing changing rules and periods of

working from home with offices re-opening.

Wecontinued to support all employees

through 2022, and havebeen able to

successfully on-board new employees

remotely, supporting them with funds for

theirhome set-up.

Engagement in 2023

We will maintain our commitment to diversity

and inclusion, keeping this front ofmind when

making decisions. Internal communications will

be enhanced to consistently align with Alfa’s

strategy and core themes, providing clarity and

focus. We will continue to listen, learn and

respond as we move to smart working.

Customers Employees

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Building trusted partnerships

anddeveloping relationships with

suppliers throughongoing dialogue

helps us tobetter understand the

needs of ourpartners and to develop

and improve our offering.

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. These

have evolved as the year has progressed with

an increase in in-person internal conferences

across the business. The Board considered

how we can build andimprove on our existing

commercial partnerships when discussing

strategic opportunities during the Board

Strategy sessions in July 2022.

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. The Board

supports continued scaling ofour existing

partnerships as well as extending our partner

ecosystem to strengthen our coverage in

coremarkets.

Engagement in 2023

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.

Alfa will launch its Supplier On-Boarding

process aswell as its Procurement Policy &

Procedures to be effective from early 2023.

This will ensure the suppliers we choose to

work with share our values, in particular those

in relation to ESG, aswell as meeting our

compliance and due diligence requirements.

These procedures willhelp to provide clarity

and guidance when engaging with potential

new suppliers.

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

We conduct extensive engagement with

ourinstitutional investors throughout

theyear.Shareholder engagement primarily

isthe responsibility of the CEO and CFO,

whodevelop and manage Alfa’s external

relationships with investors and analysts.

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. During the

year, the Board received an in-person

presentation from our joint corporate brokers.

We were delighted that we were able to hold

anin-person AGM, with shareholders invited

toattend physically and remotely in 2022. An

invitation wasincluded in the Notice of Meeting

for shareholders to ask questions in advance of

the meeting. At Alfa’s AGM, all Board Directors

are present, which provides a key opportunity

for the Board to engage with shareholders

andfor shareholders to vote on the resolutions

put to them.

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. We have built

constructive relationships with our top

shareholders at multiple levels within the

organisation, including the Chairman, CEO

andCFO. 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.

Engagement in 2023

We will continue to engage with our

shareholders throughout 2023. We are

provisionally planning to hold another investor

day in 2023.

We have a responsibility to use our

expertise and resources to add value

to the communities in which we

operate. Our intention is to reduce

our impact onthe environment

wherever possible. We also have

active internal communities –

employee-led groups that are safe

spaces for colleagues to promote

issues, support each other and

contribute to organisational change.

How the Board engaged

The Board supports employees and endorses

contributions to wider communities with

timeand expertise. Fundraising is matched

bythe Company and paidvolunteering days

areencouraged. Our internal communities

aresupported and given resources for events

and initiatives which are managed by our

communities. Each community is sponsored

bya member of the CLT and events are

promoted Company-wide.

Outcome of engagement

Our ESG Steering Group, made up of members

from across the business globally and including

our CFO and CPO, meets monthly to focus on

goals, report and record progress and to

support the direction of Alfa’s employee-led

Communities. The CEO has ultimate

responsibility to the Board for all ESG matters.

Support has been given to carbon-offsetting

projects and investment has been made into

external consultancy for ESG measurement

and guidance. We continue to fundraise for

charities and support causes close to our

colleagues’ hearts.

Engagement in 2023

Looking ahead, the Board is committed to

driving ESG initiatives further forward. We

willreview goals and a formal strategy will be

embedded in 2023. Roles and responsibilities

for the ESG Steering Group and ESG work will

be defined andcommunicated. Action will be

taken to accurately measure Alfa’s carbon

footprint and strengthen reporting in this area.

We will continue to support our internal and

external communities and use our corporate

voice responsibly wherever we can.

Communities Partners & suppliers Shareholders

Strategic report

Corporate governance Financial statements Other information

2008 2017 2019 2020 2021 2022

CSR Community

formed

LGBTQ+, Environmental

Impact & Inclusion

Communities founded

Women’s Community

founded

First adoption of

UNSDGs

Parents’ Community &

Alfa for Racial Equity

Community created

ESG Steering Group

formed

Mental Health Allies

introduced

New UN SDGs

identified

Environmental, Social and Governance

The Environmental, Social and Governance pages of our report are filled

with the good things we do for our People, our Planet and our Product. ESG

activities are part of daily life at Alfa – colleagues get involved because they

want to. Alfa offers support and time for everyone to engage in these passions

and initiatives.

In this section we’ll share details of our celebrated Employee Resource

Groups (Alfa’s Communities), delve into the hugenumber of People projects

that we undertake, look at our impact on the environment and what we’re

doing toreduce carbon emissions, provide reports and insight from various

areas, and reflect on a year of ESG activities – all under the umbrella of the

United Nations’ Sustainable Development Goals we have chosen to align with.

Alfa gender balance

Male Female Non-binary

Board of Directors 87.5% 12.5% 0.0%

Senior managers 81.0% 19.0% 0.0%

Employees 68.0% 31.5% 0.5%

Alfa gender balance is captured through voluntary and confidential self-disclosure.

Alfa’s ESG timeline

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Our ESG Steering Group, made up of

members from across the business

globally and including our Chief

Financial Officer and Chief People

Officer, meets monthly to focus

ongoals, report and record progress

andto support the direction of Alfa’s

employee-led Communities. Terms

ofReference were established for

thisgroup in 2022.

In the summer of 2022, we carried out

acomprehensive review of how we can

continue to align with and support the

UNSustainable Development Goals, having

originally adopted the goals back in 2019.

We held workshops and assessed how

relevant each SDG was to Alfa in terms

ofour current business objectives,

thechallenges we face, and our ability

tohave an impact. Aligning with the

UNSDGs helps us focus our efforts

andwork towards common successes.

We decided to align with five core SDGs.

Although these are five separate goals,

there is a lot of crossover between them

and we aim to foster initiatives which

support multiple goals.

Alfa and the UN Sustainable Development Goals

Achieve gender equality and empower all women

and girls.

What are we doing to shake up the gender split in a traditionally

male-dominated sector?

Find out more about our efforts in this area and see our Gender

Pay Gap reporting on page 60

Promote sustained, inclusive and sustainable

economic growth, full and productive employment

and decent work for all.

How can we open our doors more widely to more diverse

groups, and encourage creativity and brilliant ideas in our work?

Find out about Alfa Work Experience on page 69

Reduce inequality within and among countries.

What are we doing to share our expertise and use our privilege

to help others?

Find out more about initiatives we’re undertaking to reduce

inequalities on pages 58-61

Ensure sustainable consumption and

productionpatterns.

How are we reducing waste and being more mindful about the

way we dispose of our equipment?

Find out more about our responsible consumption choices

onpages 62-69

Take urgent action to combat climate change and

itsimpacts.

How are we reducing our negative impact on the planet and

tackling the climate crisis?

Find out all about our efforts towards fighting climate change

onpages 62-67

Materiality

In addition to the SDGs outlined above, our ESG Steering Group also decided to focus

on the key areas identified by SASB as materially impacting the software industry:

Energy Management, Customer Privacy, Data Security, Employee Engagement,

Diversity & Inclusion, Competitive Behaviour and Systemic Risk Management. By

combining these areas of materiality with our chosen SDGs we ensure our ESG

efforts have the correct focus.

Strategic report

Corporate governance Financial statements Other information

Environmental, Social and Governance continued

Alfa’s Communities

We call our Employee Resource Groups

‘Communities’ at Alfa and we’ve got eight of these

vibrant affinity groups leading the way in raising

awareness, educating colleagues, supporting each

other and making a positive impact on life at Alfa.

Alfa Communities are people-powered – full of

passion and energy!

Alfa for Racial Equity

Community

Known to friends as ‘AFREC’, this community

group was created to foster an environment

conducive to racial diversity at Alfa through

recruitment, retention and development

ofracial minority colleagues, working with

allies to instigate positive change, internally

and externally.

During Black History Month, social talks

took place on subjects including ‘The

hidden cost of Black hair – a one trillion USD

industry’. The community also ran a raffle

which raised £2,840 for the Stephen

Lawrence Day Foundation. Hispanic

Heritage Month was used as an opportunity

to share interesting blogposts. ‘Come Dine

With Me…’ office lunches have been

organised during the year, featuring world

cuisines such as Caribbean, Greek and

Filipino dishes, and are always popular!

AFREC were also behind the launch of Alfa’s

first Work Experience programme this

summer at Alfa HQ. The community also

hosted a workshop with Codebar. The

charity facilitates the growth of a diverse

tech community by running free regular

programming workshops for minority groups.

In 2023 AFREC will continue its amazing

work with celebrations for Chinese New

Year, replication of various UK initiatives

inour US and AsiaPac offices, Insight Days

with Cambridge Brown Girl Link Up and

produce some internal podcasts.

Find out more about Alfa Work

Experience on page 69

LGBTQ+ Community

Aiming to represent the collective voice

ofLGBTQ+ colleagues, encourage a safe

and inclusive working environment, and

collaborate with our allies to inspire positive

change amongst our wider communities,

Alfa’s LGBTQ+ community lays on great

events for colleagues. This active group

drove the creation and implementation

ofAlfa’s ‘Transitioning at Work’ policy.

The community has contributed to the

Stonewall Workplace Equality Index to

identify gaps in our LGBTQ+ inclusivity,

andis working with Stonewall to fill these.

We have also enjoyed a partnership with

Minus18 (an LGBTQIA+ Charity in

Melbourne, Australia) this year.

Members of the group have featured

inAlfa’s new internal podcast, in special

episodes including one sharing information

on the history of Pride month.

During Pride month, our offices were

adorned with rainbows and events were

held including hosting The Leasing

Foundation’s first in a series of LGBTQ+

Company Showcase events. This event was

followed by our annual ‘Pimm’s my Pride’

social with drinks, pizza and games, which

are always popular.

Next year the community will record more

podcasts, attend the Student Pride Careers

Fair and arrange social talks for LGBTQ+

History Month and other occasions.

Women’s Community

The Alfa Women’s Community membership

is not just made up of women – gender

diversity affects us all. This group is

strivingto build an environment with

equalrepresentation of women by

providing asupport network of allies

toencourage gender diversity in Alfa

andacross theindustry.

On International Women’s Day, welaunched

our first ‘employee stories’ –insight into

individuals across the business – focusing

first on some of ourfemale talent.

During Breast Cancer Awareness month,

our Women’s Community turned our

intranet pink and raised awareness of the

importance of early detection of breast

cancer with pink cupcake events in all our

offices. We were proud to make donations

to breast cancer charities too.

Alfa’s Women’s Community provides

support with our presence at events such

as Bright Network’s Women in TEC and

STEM Women Technology Careers events

and they have launched an exciting new

mentor programme.

In 2023 the community will focus on

International Women’s Day and Ovarian

Cancer Awareness, as well as continuing

tosupport the mentor scheme and many

more initiatives.

Parents’ Community

Originally formed in the depths of the

pandemic lockdowns, the Alfa Parents’

Community is a safe space for parents

andcarers to support and advise each

other, share tips and even some of the

frustrations and challenges that come

withparenthood.

This group has contributed to enhanced

family-friendly policies at Alfa and shares

materials that cover subjects such as

achieving a healthy work-life balance, fun

learning resources, events and personal

experiences that might help out a fellow

parent. One of our podcast episodes this

year involved collaboration with our LGBTQ+

Community, with members from both

groups sharing stories of coming out and

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

how to support young people that might

have questions around gender and sexuality.

Next year they will arrange more social talks

and are planning to create a Parenting

space on our intranet to ensure all family

friendly policies are easily accessible.

Inclusion Community

Alfa’s Inclusion Community champions

inclusion, diversity and belonging across

the whole Company. We have ambitious

goals to work on diversity and inclusion

asan organisation and this community

supports all our initiatives and challenges

our thinking.

Members of this group played an

importantrole in the development of

ourfirst Inclusion & Diversity Charter – in

which we lay out all the ways in which we

can make sure we respect, celebrate and

draw on each other’s different perspectives,

skills, knowledge and backgrounds. We’re

launching the first of a new annual Diversity,

Equity & Inclusion global survey imminently,

and the feedback we receive will be

invaluable in informing our next steps

whenit comes to bolstering our sense

ofcommunity and belonging at Alfa.

This group continues to lead the ‘Reading

for Change’ initiative: a company-wide book

club encouraging a culture of learning and

positive change at Alfa, surrounding diverse

and intersectional identities, abilities,

cultures, and ethnicities.

Environmental Impact Team

The main goal of Alfa’s Environmental

Impact group is to promote environmentally

friendly practices in the workplace, with a

longer-term goal of ensuring Alfa complies

with the Paris Agreement to keep the global

temperature rise to well below 2 degrees

Celsius above pre-industrial levels. This

team drives real change with our carbon

emissions measurement and policy

enhancements toencourage greener living.

This group, along with our Social Impact

team, was the driving force behind this

year’s review and selection of five new UN

Sustainable Development Goals, for us to

align our ESG activities with. They’re the

creators of ‘The Greenhouse’ – an intranet

group sharing green ideas and resources

for colleagues to get involved with.

Most recently they have launched a refill

station for household cleaning and hygiene

products, which colleagues can use in our

London office. We’re hoping to roll this out

to our offices worldwide soon.

This energetic team alsoorganised and

encouraged involvement involunteering

opportunities such as canal clean-ups and

‘plogging’ – litter-picking whilst jogging in

local green spaces!

Find out more on pages 62-69

Social Impact Teams

Our Social Impact Teams do great things to

partner with charities and raise awareness

of volunteering opportunities and other

things we can all do for good.

They lead the way with establishing our

great relationships with charities – this year

linking with our new EMEA charity partner

The Food Foundation, having supported

The Climate Coalition until September 2022.

In the US and AsiaPac they are working to

launch new charity partnerships in early

2023, having supported Feeding America

(US) and Indigenous Literary Foundation

(AsiaPac) throughout 2022.

Globally they actively seek out local

opportunities to make a difference. In the

US we are proud to be working with Adopt a

Family to donate, wrap and deliver gifts to

families in need over the holiday season.

A focus for next year will be to establish

defined roles and add new members to the

Social Impact Teams in efforts to increase

the amount of initiatives that can be

undertaken throughout the year.

Mental Health Allies

Our Mental Health Allies share regular

updates and resources with colleagues,

supporting everyone with all aspects of

mental wellbeing.

We have a network of trained Mental Health

First Aiders that cover all our regions and

are a point of contact for colleagues who

are experiencing a difficult time or

emotional distress. Mental Health First

Aiders are trained to listen in confidence

and are able to confidently signpost to

appropriate support, both internal and

external. No matter their time zone or

location, Alfa has a Mental Health First

Aiderto help our colleagues.

Social Talks with external professionals have

been arranged to mark occasions such as

World Mental Health Day. The useful advice

and resources shared by our Mental Health

Allies sensitively cover topical themes that

support us all.

Next year this group will focus on

collaboration with other communities,

linking the impacts of mental health to

theconcerns of those groups. They will

continue their efforts to reduce mental

health stigma in the workplace.

Strategic report

Corporate governance Financial statements Other information

Environmental, Social and Governance continued

People

Inclusion & Diversity

We are passionate about providing an

inclusive workplace that promotes and values

diversity. All our employees should be able to

bring their best and most true selves to work.

This year we ramped up our Inclusion &

Diversity efforts with the creation of a new

intranet hub, laying out our pledges and

tracking progress against various elements

of our I&D charter.

• We launched Flexible Cultural Days –

allowing our people to swap in and out

ofnational public holidays that might not

match their particular values, beliefs or

heritage. This will be expanded in 2023.

• We added a ‘Belonging’ question to

Pulsesurveys, for direct feedback on

howwe’re doing.

• We held social talks, took part in panel

discussions and published blog posts on

the subjects of inclusion and diversity.

• We launched ‘Inclusive Leadership

Training’ for CLT members and made

shared objectives for the CLT to

sponsorcommunities.

• We launched ‘Inclusive Recruitment Training’

to support our graduate recruitment,

including Unconscious Bias training for

everyone involved in interviewing.

• We officially launched smart working with

accompanying support for individuals,

teams and managers.

• We created a ‘Transitioning at Work’

policy and updated our HR systems

toinclude an ‘Mx’ option. Parental leave

policies also now reflect same sex

relationships.

• We launched an initiative to encourage

sharing of ethnicity in our HR system to

enable us to proactively report Diversity

Pay Gap data.

• We purchased Textio, a workplace

language guidance tool, to scan

recruitment text for advice on social bias.

We have seen improvements in the

racialdiversity of candidates who apply

forour graduate programme. Of all

applications submitted to our

2021programme, 50% were submitted

bycandidates from an Asian, Black or

mixedbackground. This increased to

54%for our 2022 programme.

We have seen greater gender diversity

atmore senior levels of the organisation.

24%of senior management (Grades F+)

positions are held by women as at December

2022, an increase from 12% inJuly 2022.

We are also seeing improved race/ethnicity

diversity in joiners to the Company. Of new

joiners between Jan-Dec 2022 (of those who

have declared their race/ethnicity) 59%

were from a non-white background, an

increase from 51% in 2021.

Wellbeing

We continue to invest in wellbeing and

regularly review our benefits offerings and

work-life balance of our teams and offer up

a host of resources and tools to support

wellbeing – with an increased focus now

that we operate a hybrid ‘smart working’

model.

Along with enhanced paid carer leave

allowance, access to physical, mental and

financial advice and assistance via our

Employee Benefits platform, and working

from home contributions, we have

continued to grow our internal network

oftrained Mental Health First Aiders.

In 2021 we launched Gympass and Peppy

health (in the UK), providing support for

menopause, fertility and new parents. 2022

saw us also launch Peppy’s new Peppy

Menservice.

Culture & Events

Our culture remains one of the things we’re

most proud of at Alfa. Our vision is to grow our

company size naturally but grow our impact

rapidly – retaining the underlying culture that

makes Alfa such a great workplace.

In the final quarter of 2022 we achieved our

highest ever overall engagement score in

our global Pulse survey: 84% engagement.

We also reached 84% in September 2015.

The Q4 2022 survey also saw 63%

participation, the highest in three years.

In this final employee survey of the year

wesaw an increase in the ‘I feel valued for

my contribution’ score, at 66%, up from 63%

in Q3 2022. We tracked an increase in the

‘Alfa has strong leadership and top-level

direction’ score, at 72% in Q4 2022, up

from69% in the previous quarter’s survey.

A programme of events throughout the

year has kept colleagues engaged and

feeling included, with the move to smart

working and some of the challenges hybrid

and remote working can present.

Our ‘In Conversation With…’ series has

continued – with global colleagues dialling

into video conferences with guests

including some of Alfa’s valued clients.

This year Alfa grew to a combined workforce

of 441, with 104 appointments made during 2022.

Diversity is encouraged and valued in Alfa’s global

workforce. We aim to employ, retain and develop

employees for the long term, offering professional

development alongside that of our culture

andvalues.

Throughout 2022 we worked hard on various

initiatives to support our people and our

workingenvironment.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

These events give us a great opportunity

toask questions and get insight from

different angles.

The 2022 US Company Conference was held

in San Francisco in June. A great opportunity

to get the whole team together, following

business content, attendees enjoyed exploring

the city with a range of activities on offer.

The AsiaPac September 2022 Conference

was held separately in Queenstown and the

Gold Coast in New Zealand and Australia

respectively. A single meeting via Zoom

washeld across both regions to connect

the teams.

Also in September, our EMEA conference

took place in Windsor, UK. This was another

fantastic event with workshops and

networking opportunities galore.

Our Summer Festival gave a chance for

colleagues to bring family and friends

together to enjoy activities in the sun in

oneof London’s parks.

As ever, our events teams continue their

inclusive calendar of enriching events including

fascinating social talks on a range of topics and

organise well-received giveaways such as

advent calendars and branded goodies.

We also continue our focus on innovation at

Alfa. We see huge value in hosting a regular

schedule of innovation days and Hackathon

events several times a year, for employees

to work on any aspect of Alfa, from product

to people.

Feedback

We take feedback seriously at Alfa and in

linewith our continued desire to promote

inclusion and diversity, and our commitment

to improve and communicate channels for

providing anonymous feedback in all areas,

this year we have lined up and shared our

feedback routes with all colleagues.

• Direct support from HR, managers, CLT

members and Board members is actively

encouraged as a first step.

• Our quarterly Pulse Surveys give a

completely anonymous channel for rating

how we are doing, as well as the freedom to

write questions and suggestions. We use

an external tool, CultureAmp, to guarantee

anonymity and help crunch the data. We

publish the scores and highlights soon

after response deadlines, then the Pulse

Review Group discusses questions raised

at length – to ensure we have considered

and understood all perspectives and

involved the right people – before we share

our answers on those too.

• Town halls are held every few months and

are a chance to speak directly to the CLT.

These take place online and in-person.

• Anonymous support is also available to

those not comfortable communicating

directly or using the above routes.

Learning & Development

Investing in a new Learning Management

System (LMS), this year we launched our new

tool, packed with support and resources for

self-learning, formal training and a host of

other development opportunities. Everyone

at Alfa gets five days a year to use on

learning and development.

At the end of 2022 we have a total of

103course offerings on our LMS. 41 of

these are digital courses. 10 of these are

downloadable lessons. Content has been

co-curated by learning specialists and Alfa’s

in-house experts in various fields.

• We have focused on Management

Development resources and approaches.

• Our Women’s Community launched a

Mentoring Scheme. We have also

partnered with upReach to provide

mentors to their students through their

mentoring programme.

• We have redesigned and improved our

Onboarding & Induction processes.

• We continue to focus on talent development

across the business, providing more

opportunities for progression and personal

growth ownership.

Alfa’s Chief Executive Officer,

AndrewDenton, takes ESG, inclusion

and diversity seriously inside and

outside Alfa.

He is Director and joint founder of the

Leasing Foundation, supporting the

leasing and auto and equipment finance

industry through charitable activities,

research and development.

Andrew is an Advisor to The Women’s

Association, boosting gender equality in

the corporate world, and he is a proud

member of the Board of Trustees for

Professors Without Borders, bringing

top-level educators and global experts

to the doorsteps of students worldwide.

Using our Corporate Voice for Good

Alfa’s annual Pimm’sMyPride event.

Strategic report

Corporate governance Financial statements Other information

Environmental, Social and Governance continued

People continued

Recruitment & Retention

We ended 2022 with retention at 90%

across the business. Smart (hybrid) Working

came into full operation in 2022 and we’ve

supported teams all year with this new

wayof working, with a particular focus

onsupporting managers with hybrid

teammanagement.

A complex project to launch Workday

Recruitment, streamlining recruitment

processes via our existing HR platform,

came to fruition this year. The new applicant

tracking system (ATS) supports the entire

recruiting lifecycle in one seamless system.

From configurable job requisitions, to

candidate management and real-time

communication and feedback, Workday

Recruiting helped us with true visibility

andcollaboration across the entire talent

acquisition process.

A significant moment for the business was

the launch of a new Software Engineering

Smart Hub in Lisbon, Portugal. The initiative

has started successfully with a group of

local engineers already onboarded and, as

part of our engineering team, working on

our product backlog. We will continue our

recruitment into 2023.

The launch of Alfa’s new website in 2022

provided the opportunity to revamp our

Careers pages with great new content

featuring more of our people and our culture.

We commissioned an employer brand film

which contains footage from all our offices

and helps our personality to shine.

Throughout the year we shared Employee

Stories – interesting snippets from

individuals in different roles and varied

locations – both internally and externally,

helping to give more insight into our roles

and our diverse talent.

In 2023 we will continue to raise the

profileof Alfa as an attractive employer,

with campaigns planned around the

opportunities we have for secondments

and other content such as our suite of

supportive benefits.

Gender Equality

The gender pay gap analysis provided here is based on UK data as at 5 April of each year

and this report reflects the data collected and analysed as of 5 April 2022.

Statutory Gender Pay Gap (GPG) Reporting

Gender Pay Gap %

2022 2021

Median Pay Gap 26.0% 15.3%

Mean Pay Gap 17.8% 15.1%

Gender Split in pay quartiles

2022 2021

Female Male Female Male

1st Quartile (Lowest) 47% 53% 49% 51%

2nd Quartile 32% 68% 24% 76%

3rd Quartile 19% 81% 22% 78%

4th Quartile (highest) 19% 81% 23% 77%

Total 30% 70% 29% 71%

Bonus Gap %

Median Bonus Gap Mean Bonus Gap

Bonus Gap 2022 2021 2022 2021

Alfa 31.0% 29.3% 38.1% 37.7%

% men and women receiving a bonus

2022 2021

Female Male Female Male

Alfa 73% 80% 71% 75%

Vicky Edwards

Chief People Officer,

Alfa Financial Software

“2022 has seen Alfa

grow in many ways – we have

delivered a number of exciting

People projects with many more

underway as we look ahead to

2023. We continue to work hard

on things that really matter to

our colleagues, such as inclusion,

diversity, equity, development

and all things ESG. These are the

priorities that really underpin our

special culture.”

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Our gender pay and bonus gap data is

influenced by the composition of our

workforce, as a result of being a technology

organisation, as well as changes to our

employee population which is impacted by

new joiners, leavers, organisational change

and global secondment opportunities.

Asaresult, we have seen year-on-year

fluctuations in our pay gap figures.

Our analysis shows that we have more men

than women at all levels of the Company,

which is reflective of the overall challenge

faced by the wider UK industry where typically

fewer women are drawn to technology and

STEM related disciplines. In particular, the

Company continues to recognise that there is

a higher proportion of women in business

and support function roles in comparison

with technology roles, a reflection of the

ongoing challenge faced by the technology

and STEM industry in general.

Our mean gender pay gap has increased from

15.1% in 2021 to 17.8% in 2022. We have also

observed an increase in the median pay gap

from 15.3% in 2021 to 26.0% in 2022. As has

been observed and reported in previous

years, the ratio of females to males at more

senior grades and the number of women

excluded from the pay data set (i.e. due to

maternity leave, sabbatical) are key factors

contributing to Alfa’s gender pay gap.

Whilst we are actively hiring more women

into the business year-on-year, these new

joiners are often hired into positions at

lower grades (e.g. graduates), which

therefore makes the gender pay gap more

difficult to influence in the shorter term.

Award Winning

We were proud to be recognised with various

awards and shortlistings this year. Our work

isalways ongoing, but it’s important to take

stock and celebrate our successes along

theway.

• UK Most Loved Workplace – ranked #4

inNewsweek’s Top 100 Most Loved

Workplaces in the UK.

• Investors in People – Gold accreditation.

• Investors in People – shortlisted for the

Award for Diversity & Inclusion.

• Reward Gateway – finalists for an

Engagement Excellence Award in the

category: “Change Leaders – Best

Diversity, Equality and Inclusion Strategy”.

Giving Back & Volunteering

Part of our people power at Alfa is

channelled into helping in local communities

and with charity partners that can use our

expertise. Everyone receives three days a

year towards volunteering.

Change Please baristas

Change Please operates in eight countries,

have trained 500 baristas with over 85%

going on to find ongoing employment, and

provided 5,000 nights of accommodation

through fundraising. 100% of Change

Please profits fight homelessness. After their

initial academy training, baristas are given

three months’ work experience, traditionally

in one of Change Please’s cafés in London.

Moor, our London office cafe, is now one

ofthe cafés adding to their safe spaces for

baristas to gain more experience, build up

their CVs and hopefully open up more future

job opportunities. We have worked with

trainee baristas on rotation in order to provide

as many people as possible with experience.

Code Your Future volunteering

Alfa’s volunteering scheme has provided

our colleagues with the opportunity to

volunteer with Code Your Future, an

organisation dedicated to helping refugees

and those on low-incomes start great

careers in tech.

Partnership with UpReach

Alfa has an established partnership

withUpReach. They work to facilitate

programmes for those from less-

advantaged backgrounds to access and

sustain top graduate jobs. So far, Alfa

employees have provided direct support

tostudents in terms of career coaching,

mock interviews and more.

Charity support

Across Alfa, the total charitable donations

from all regions (from both the Company

and colleagues) amounted to £40,187.

We took advantage of the opportunity to

donate Apprentice Levy funds this year –

choosing to partner with an organisation

that aligns with our UN SDGs. The Growth

Company generates investment, helps to

upskill and place hundreds of thousands

ofpeople in work or progress their careers,

and has worked with tens of thousands of

businesses to start, grow, internationalise

and become more environmentally

sustainable. We donated 25% of our

Apprentice Levy fund to The Growth

Company in 2022.

The festive period is always a busy time for

ESG activities and our people got behind

campaigns to donate to Hackney Foodbank

in the UK, donate to Save the Children

alongside Christmas Jumper Day and

several families were ‘adopted’ over the

holiday season by our US teams, who pulled

together to buy presents and treats for the

deserving households.

Around the world our colleagues get

involved in a plethora of other volunteering

opportunities, including canal cleanups,

helping at the National Trust, training for

Essex Search & Rescue volunteering,

supporting school PTA events, wildlife

conservation in the Greater Kruger,

servingat soup kitchens and doing

jobsatSpitalfields City Farm.

Strategic report

Corporate governance Financial statements Other information

Environmental, Social and Governance continued

Planet

Alfa’s Chief Financial Officer,

Duncan Magrath, is ultimately

responsible for our Environmental

Policy and climate change

issues.One of the aims of our

Environmental Policy is to carry

out our business in a manner that

minimises our impact on the

environment. The Chair of the

ESG Steering Group, Grahame

Williams, oversees all initiatives

which derive from this policy

asthey are put into action.

TheEnvironmental Impact

Team,agroup of volunteers

fromall levels of the Company,

isresponsible for the execution

oforganised activities and

themonitoring of standards

established to ensure adherence

to our environmental goals.

Electricity

Alfa sources our electricity from renewable

energy providers. During 2022, 100% of

Alfa’s UK electricity was sourced from

renewable sources.

In owned data centres, our provider has

noted that 94% of our energy utilisation

was from renewable energy sources.

Alfaalso uses data centres operated

byathird party, AWS Cloud Computing.

AWS iscommitted to powering operations

with 100% renewable energy by 2025.

Our office in Australia has an energy

contract that includes a ‘Renewable

Matching Promise’. Every unit of electricity

bought is matched by the generation of a

unit of electricity from a renewable source.

Charity Partnership with

Climate Coalition

The Climate Coalition was our official

charitypartner in EMEA for 2021/22

andweengaged in a wide range of events

and fundraising activities with them. The

Climate Coalition aims to bring people

fromall walks of life and organisations with

different goals together to collectively call

for climate action. We plan to continue to

engage with the Climate Coalition in the

future, even though our official charity

partnership has come to an end.

Alfa’s Carbon Footprint

We are working with EcoAct to produce

aplan to reach net zero using a Science-

Based Targets approach. Once we have

reduced our carbon emissions, we will then

offset any emissions that we’re unable to

eliminate completely from our operations.

Engaging Ecologi

One of our Company objectives for 2021

was to reach carbon neutrality as an

organisation (an interim solution while

wework on the net zero plan referred to

above). We looked at various options and

eventually worked with Ecologi for credible,

impactful offsetting projects to support.

Carbon offsetting is only a credible tool

when used alongside emissions reduction

strategies, which we are beginning to

implement where possible.

Office environment

2022 saw the introduction of a ‘refill station’

in our London office, helping to reduce

consumption of single-use plastics.

Colleagues can bring containers to refill

withcommonly used household products

including hand soap and washing up liquid.

We’re looking to introduce a similar scheme

in the US.

We partner with bio-bean, to renew our

used coffee grounds, we have installed

organic food waste compost bins, and office

cleaners use eco-friendly cleaning products.

Alfa’s London office has achieved an

‘excellent’ rating under the BREEAM In-Use

certification for 2022/23.

Laptop recycling and

donations

Our Technical Operations team helped us

to donate some of our old laptops to local

schools during the pandemic. At Alfa, we

generally refresh laptops on a three-year

cycle. This year wehad a number of

high-spec laptops of around three years

oldthat were fully depreciated and awaiting

disposal. Recycled and fitted with a new

hard drive, we were delighted to donate

these to local schools.

Alfa’s Environmental Policy includes a

commitment to continue to engage and educate

employees and other stakeholders on the

importance of sustainability, and encourage

sustainable activities.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

We also partner with KOCycle to support

the repurposing of IT assets globally,

tohelpreduce landfill and support a

circular economy.

In 2022 KOCycle collected 495 mixed assets

(a variety of devices and equipment) from

Alfa offices across three locations: London,

Dallas and Michigan. 135 of those were

reused and 360 were recycled.

1,200 trees were also planted in partnership

with Tree Nation via our carbon

sequestering activities with KOCycle.

Cycle-to-Work scheme

Alfa continues to offer a cycle-to-work

scheme, encouraging employees to buy

abicycle (and accessories) to replace their

usual modes of transport to work, such

asthe train. Now that we’re back to more

regular commuting, the Environmental

Impact Team are working towards

encouraging more people to cycle –

forexample, we are now providing free

bi-annual bike services at our London office.

Looking ahead we’re going to continue to

work on ensuring that our event giveaways

are recyclable or biodegradable wherever

possible. We want to encourage colleagues

to live more sustainably whilst raising vital

funds for our charity partners.

Carbon Emissions

Towards the end of 2022 we launched our

first global commuting carbon emissions

survey. We asked colleagues to share details

with us on their travel in order to help

expand our Scope 3 reporting from

business travel to include commuting data,

to give us a more accurate picture of our

emissions. We have worked with EcoAct to

crunch the numbers and establish more

accurate carbon emissions data than we’ve

ever had before.

Emissions reporting

Methodology

Alfa Financial Software Holdings Plc is

required to report its energy use and carbon

emissions in accordance with the Companies

(Directors’ report) and Limited Liability

Partnerships (Energy and Carbon Report)

Regulations 2018. The data detailed in the

tables below represents emissions and

energy use for which Alfa Financial Software

Holdings Plc isresponsible, including energy

use on its sites and fuel used in the

Company fleet. Wehave used the main

requirements of theGreenhouse Gas

Protocol Corporate Standard to calculate our

emissions, along with the UK Government

GHG Conversion Factors for Company

Reporting 2022. Part of our Scope 3

emissions inventory was also calculated. This

process included the use of UK Government

GHG Conversion Factors for Company

Reporting 2022, IEA Emission Factors 2022

and CEDA Global Emission Factors. Any

estimates included in the totals are derived

from actual data extrapolated to cover

missing periods orfrom benchmarks.

Emissions relating to natural gas

consumption in the UK and US for

thecomparison year 2021 have been

updated to reflect an updated calculation

methodology, which was used to increase

emission calculation accuracy.

Energy Efficiency Statement

We are committed to responsible carbon

management and will practise energy

efficiency throughout our organisation,

wherever it is cost effective. We recognise

that climate change is one of the most

serious environmental challenges currently

threatening the global community and we

understand we have a role to play in

reducing greenhouse gas emissions.

We have implemented the following

policiesfor the purpose of increasing the

business’s energy efficiency each year:

• Changed energy suppliers for the

UKoffice, ensuring continued renewable

electricity provision.

• Changed the traditional company car

scheme to one that has a green focus,

ensuring the increased use of electric

and hybrid vehicles over petrol and

dieselvehicles.

Strategic report

Corporate governance Financial statements Other information

Task Force on Climate-Related Financial Disclosures (TCFD)

We set out below our climate-related financial disclosures that are based on the TCFD recommendations and recommended disclosures.

Bythis we mean the four TCFD recommendations and the 11 recommended disclosures set out in Figure 6 of Section B of the report entitled

“Recommendations of the Task Force on Climate-Related Financial Disclosures” published in October 2021 by the TCFD. We have based our

disclosures on the TCFD ‘Guidance for All Sectors’ and note that we do not operate in an industry for which the additional supplemental

guidance applies. Where we have not adopted TCFD recommendations in full, we have explained the reasons below. For our TCFD

disclosures, ’materiality’ is considered to be the threshold at which ESG issues become sufficiently important to our investors and other

stakeholders that they should be disclosed. We believe that the audit materiality (as disclosed on Page 127) meets thiscriteria and is

therefore the materiality we have applied to our TCFD reporting. We are also informed by stock exchange listing anddisclosure rules.

Weunderstand that what is important to our stakeholders evolves over time and we will continue to assess ourapproach to ensure

weremain relevant in what we measure and disclose.

Area

Recommended

Disclosure Alfa Disclosure

Governance a) Describe the board’s

oversightof climate-

related risks and

opportunities.

The CEO has ultimate responsibility to the Board for all ESG matters.

Climate-related risks and opportunities are presented to the Audit & Risk Committee (made up of Board members)

twice a year following detailed risk reviews (see the Risk Section on Page 40). These risks and opportunities are

discussed and debated in the Audit & Risk Committee meetings, where the Committee is also updated on progress

against goals and targets discussed in earlier meetings.

Over the year the Board has received briefing from an external provider on certain ESG related matters and was also

given an update on reporting legislation by Management in June 2022. In 2022 the Committee debated the need for

thoughtful travel and the impact on the environment in the context of the 2023 budget.

b) Describe management’s

roleinassessing and

managingclimate-

relatedrisksand

opportunities.

The CFO is responsible (at Company Leadership Team level) for the Group’s Environmental Policy and climate change

issues. Senior management are informed about climate-related issues by a number of ESG publications and also by

regular discussions with our external ESG advisor.

As part of the twice-a-year detailed risk management process carried out by management, the CLT reviews and

discusses the latest view of all opportunities and risks including those related to climate.

The ESG Steering Group is made up of key individuals from different areas of the business globally, anditsupports

the CFO in the development and delivery of ESG strategy, key policies and material commitments. It does this

byproviding oversight, coordination and management of ESG commitments and activities. The Steering Group

discussed climate-related issues in 11 meetings in 2022, which also included monitoring climate-related risks

andmeasuring progress of initiatives against targets. Both the CFO and CPO sit on the Steering Group and brief

the CEO and wider CLT on the status and progress of projects. Members of the Steering Group have kept up to

date on ESG matters in a number of ways – these are tailored by individual and in 2022 have included attending

webinars (such those specific to our industry) and courses for professional development (such as the CFA

certificate in ESG investing). Initiatives led by the Steering Committee in 2022 include embedding ESG into

oursupplier onboarding process (to be rolled out in 2023).

The Environmental Impact Team, a group of volunteers from all levels of the Company, is responsible for the

execution of organised activities and the monitoring of standards established to ensure adherence to our

environmental goals. Initiatives recommended (and subsequently implemented at Alfa) by this team in 2022 include:

• Initiatives to reduce single use plastics (such as a lunch box scheme and a refill station for detergentbottles);

• A 30-day wildlife trust campaign;

• Arranging various social talks and workshops; and

• Arranging volunteering activities (such as a canal clean up in London).

Management also supported several other initiatives, such as the ‘Cycle to Work’ scheme and transitioning to a new

‘green’ salary sacrifice car scheme.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Area

Recommended

Disclosure Alfa Disclosure

Strategy a) Describe the climate-

related risks and

opportunities the

organisation has

identified over the

short,medium, and

longterm.

Management have considered the risks outlined in Table A1.1 of the TCFD Implementation Guidance as part of carrying

out their TCFD disclosure review. In addition, we also referred to the SASB (Sustainability Accounting Standards Board)

sector specific materiality assessment guidance for the Software and IT Services Industry – this showed that, from an

environment perspective, the key issue for our industry is Energy Management (which is in line with our current focus).

When concluding on which risks and opportunities could be material, we considered the financial impact that these

could have on the Group. As part of this exercise, we looked at the actual costs (e.g. energy costs) in the year that could

be impacted, and held discussions with internal teams to quantify the impact (for example, our risk management

process as mentioned below and on Page 41 requires us to consider the ‘impact’ and ‘probability’ of the ESG risks).

In the short term (2023-2025, which is consistent with our viability assessment period – see Page 46 for why we believe

a three-year assessment period is appropriate) we see little impact of climate-related risks and opportunities on our

business. This is reflective of our product which is not significantly impacted by climate, and the fact that we already

actively seek to manage and mitigate climate-related risks. We identified a short-term risk of not keeping up to date

with enhanced emissions-reporting obligations – we have mitigated this risk by working closely with external ESG

advisors to support us in our reporting requirements.

In the medium to longer term (2026 onwards) we see more positives for Alfa than negatives. A move towards new lower

carbon technologies is likely to result in increasing requirements for asset backed finance solutions (as they are

generally more expensive), which will drive growth in our underlying markets. In addition, increasing reporting

requirements through the supply chain will require agile systems that can respond to the new reporting requirements

which will increasingly demonstrate the greater flexibility of Alfa Systems over competitor products.

We are acutely aware of our responsibility to contribute towards the global efforts to mitigate against climate change and

are therefore actively looking to reduce our carbon footprint, including reducing travel to client sites, using renewable

energy options in many of our offices, looking at our supply chain emissions, and considering travel distances for the

location of conferences. On page 17 and page 41 of the Strategic Report we discuss how climate-related risks and

opportunities are impacting our business, strategy and financial planning.

b) Describe the impact

ofclimate-related risks

and opportunities on

theorganisation’s

businesses, strategy,

andfinancial planning.

As most of our operations are in the UK and USA, these geographies are the ones that would have the most impact on

our global climate-related material risks and opportunities. Given that both geographies have a similar nature of

operations, we do not expect one of these to be differently impacted as compared to the other.

To enable our systems to respond to increasing demands for multi-modal solutions and emissions reporting and for

Alfa to be viewed as a leader in sustainable financing solutions, we have spent time understanding the ESG related

needs of our customers and investment required in the product. We hope to recoup this investment through a

combination of increased market share, as clients focus more on Scope 3 reporting and turn to ESG compliant

solutions, and increased licence revenue for more value-added, market-leading products.

In 2022 we updated the policies relating to our supply chain, with more focus to be given under the new policies to

the emissions and ESG policies of our suppliers.

In 2022, the Group has worked towards setting validated carbon reduction targets through the Science-Based

Targets initiative (SBTi). Working with external advisers, the Group has worked on calculating its emissions across its

entire value chain, in preparation for setting targets to reduce its Scope 1-3 emissions. Our 2022 EMEA conference

was held in the UK rather than overseas which was a conscious decision based on reducing emissions. Similarly,

emissions have been an important consideration when planning for Company events taking place in 2023; such

decisions were taken as part of the budgeting process during Q4 2022.

As part of our planning for internal travel (i.e. all travel not being for client project or sales purposes) we have planned to

optimise our use of travel especially in the US (where our teams are spread across the country) by aligning the purpose of

visits to Alfa offices. Additionally, we have implemented a requirement for CLT oversight of planned internal travel so that

we can ensure we are prioritizing the most necessary travel regardless of it being within approved budget amounts.

Energy Management continues to be important to us – see page 62 for considerations given to renewable energy for

our offices. The ESG section (page 55) outlines how we align with five core UN SDGs – one of which is ‘Climate Action’.

Strategy

continued

c) Describe the resilience

ofthe organisation’s

strategy, taking into

consideration different

climate-related

scenarios, including a

2°Cor lower scenario.

We have not done detailed quantitative scenario analysis in 2022, but did do a qualitative analysis and high-level

quantitative analysis (which included looking at our energy-related costs for 2022). Given the nature of our

operations and offering, and considering the output from our analysis, we do not believe there are material risks to

our organisation, other than the overall risk to the world economy.

We have considered the impact of a 2°C scenario and believe that the Group’s strategy and financial performance

will be resilient to such an impact, and we note this is consistent with our overall view that climate-related scenarios

are not expected to have a material impact on our business.

Strategic report

Corporate governance Financial statements Other information

Task Force on Climate-Related Financial Disclosures (TCFD) continued

Area

Recommended

Disclosure Alfa Disclosure

Risk

Management

a) Describe the

organisation’s

processesfor

identifyingand

assessingclimate-

relatedrisks.

As explained in the Risk Management section on Page 40, we have a comprehensive risk management process which

includes a detailed assessment of risks twice a year. Included within this process is explicit consideration of

climate-related risks.

For climate-related risks, the risk management team works closely with the CFO and the ESG Steering Group to

ensure that all climate-related risks relevant to the Group are included. At the same time, the potential impact to the

Group is also considered for these risks.

As stated above, we do not believe that the climate-related risks have a significant impact on the Group (and so these

have not been disclosed as part of our principal risks). However, given the increasing importance of climate-related

risks, we still discussed these at our Audit and Risk Committee meetings, including the December 2022 meeting

(where we typically only focus on the principal risks).

b) Describe the

organisation’s

processesfor

managingclimate-

related risks.

As above, in the short term we do not see significant climate-related risks for the organisation. As a consequence, we

keep the risks under review, but are not actively managing any at this point in time. One exception is the risk related

to enhanced emissions-reporting obligations, for which we believe that working closely with external ESG advisors

for our reporting requirements does mitigate the risk.

c) Describe how

processesforidentifying,

assessing, andmanaging

climate-related risks

areintegrated into

theorganisation’s overall

riskmanagement.

Climate-related risks are an integral part of our overall risk management, and, in particular, are discussed when

considering the corporate level risks.

As above, an increased focus was given to climate-related risks in the 2022 risk management process, where we have

worked closely with the ESG Steering Group and other senior management to ensure that all climate-related risks are

sufficiently covered in our risk register. Going forwards, the risk register will continue to be reviewed twice a year and

updated for any changes to climate-related risks.

Metrics and

targets

a) Disclose the

metricsused

bytheorganisationto

assess climate-related

risks andopportunities

inlinewith its

strategyandrisk

management process.

During the year we looked at our energy costs and usage . As seen in our SECR reporting on page 67, we looked at a

number of other data sources as well, including our emissions relating to employee commuting, business travel and

cloud storage services.

We disclose our Carbon Intensity Ratio on page 67, which is a metric used by the Group to assess climate-related

risks and opportunities in line with its strategy and risk management process. It can be seen that our ratio has

stayed similar to 2021, which reflects our efforts towards reducing emissions being offset by more employees

choosing to physically work in the office as compared to the previous year when there were restrictions.

During 2022 we worked towards better understanding our emissions to allow us to consider further metrics for

monitoring our emissions.

Separately, we are also aware of the growth projections in the underlying auto and equipment finance market.

b) Disclose Scope 1,

Scope2, and,if

appropriate, Scope 3

greenhouse gas (GHG)

emissions, and the

relatedrisks.

See page 67 for our SECR disclosure and page 63 for the methodology used. In addition to the mandatory

disclosures for Scope 1 and Scope 2 emissions, we voluntarily disclosed emissions related to business travel as part

of our Scope 3 emissions in 2021. In 2022, we have taken this further by voluntarily expanding our disclosed Scope 3

emissions to now include emissions relating to employee commuting and purchased services (AWS).

As we continue our journey to net zero, we will consider if more categories can be included in our

Scope3disclosures.

c) Describe the targets

usedbythe organisation

tomanageclimate-

related risksand

opportunities

andperformance

againsttargets.

No climate-related targets were set for 2022 as we wanted to better understand our emissions before setting the

targets. As above, we spent time in 2022 working with our advisors to better understand our emissions.

In 2023 we are working towards setting validated carbon reduction targets through the Science-Based Targets

initiative and will then use these targets to measure and reduce our Scope 1-3 emissions.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

The table below discloses the Group’s Streamlined Energy and Carbon Reporting for 2022 and 2021. As part of our commitment towards

continuous improvement of our reporting, we have voluntarily added three new categories to our Scope 3 emissions reporting – Category

1 (Purchased goods and services), Category 3 (Fuel & Energy Related Activities) and Category 7 (Commuting and work from home).

2022 2021****

Global

(inc. UK) UK Only

Global

(not inc.

UK)

Global

(inc. UK) UK Only

Global

(not inc.

UK)

Energy Consumption (kWh)

Total Natural Gas Use 154,733 33,184 121,549 75,448 47,017 28,431

Total Company Fleet Use 92,708 86,969 5,739 131,651 130,993 658

Total Electricity Use 248,554 193,415 55,139 112,333 100,016 12,317

Total Energy Use** 495,995 313,568 182,427 319,432 278,026 41,406

Scope 1 Carbon Emissions (tCO

Natural Gas 28 6 22 14 9 5

Car Fleet (petrol/diesel/hybrid) 23 21 1 37 37 0

Total Scope 1 Emissions 51 28 24 51 46 5

Scope 2 Carbon Emissions (tCO

Purchased Electricity – Buildings (Location Based) 44 23 21 34 29 5

Purchased Electricity – Buildings (Market Based) 9 0 9 * * *

Purchased Electricity – Electric Vehicles (Location Based) 14 14 – 12 12 –

Total Scope 2 Emissions 58 37 21 46 41 5

Scope 3 Carbon Emissions (tCO

Category 1 – Purchases Goods & Services – Cloud Storage Services*** 681 – 681 * * *

Category 3 – Fuel & Energy Related Activities 36 27 9 * * *

Category 6 – Business Travel (Flights, rail, grey fleet, hotels and taxis) 410 147 263 50 3 47

Category 7 – Commuting and Work From Home 428 232 196 * * *

Total Scope 3 Emissions 1,556 406 1,150 50 3 47

Total Emissions (tCO

Scope 1 51 28 24 51 46 5

Scope 2 (Location Based) 58 37 21 46 41 5

Scope 2 (Market Based) 9 0 9 – * *

Scope 3 1,556 406 1,150 50 3 47

Total Carbon Emissions (tCO

e) 1,674 471 1,203 147 90 57

Total Revenue (£m) 93.3 83.2

Carbon Intensity Ratio (tCO

e per £million)***** 1.2 * 1.2 *

* Not calculated last year.

** Total Scope 1&2 Energy Consumption.

*** Cloud storage services are used across global operations, unable to split across countries due to data availability. This figure currently only accounts for

partial coverage of Scope 3 Category 1 emissions.

**** 2021 consumption and emissions data has been updated to reflect new calculation methodology.

***** Carbon Intensity figure includes only global Scope 1&2 emissions. The prior year ratio has been updated to only include Scope 1&2 emissions for

comparison purposes. Alfa Financial Software Plc is still in the process of calculating its full Scope 3 value chainemissions.

The methodology used for our SECR reporting has been disclosed on page 63.

Streamlined Energy and Carbon Reporting

Strategic report

Corporate governance Financial statements Other information

Environmental, Social and Governance continued

Product

Harnessing a sustainable

process for our core software

We are committed to adopting and

applyingthe latest technology to ensure

that our own and our customers’ energy

consumption is kept to a minimum.

Ourefforts in this area are in line with the

Sustainable Production and Consumption

Sustainable Development Goal.

We recycle or donate as much of our

oldITkit as we possibly can, working with

dedicated recycling providers who are as

focused on sustainability as we are. We

recently created a recycling scheme for

employees, allowing them to recycle

personal electronic items they no longer

have a need for.

Sustainable practices within

our core software

Cloud First

We have transitioned to a ‘cloud first’

approach to Alfa Systems implementations.

An environmental benefit comes from our

use of AWS Cloud Computing for our hosted

service as AWS is committed to powering

operations with 100% renewable energy

by2025.

We see real benefits in the speed of

implementation for customers, and they

inturn see significant benefits in the

reliability of the service. Our cloud-native

hosting service provides geographical

flexibility and rapid deployment while

removing the responsibility of application

support, monitoring and availability from

our customers.

Accessibility

We are committed to ensuring Alfa Systems

isaccessible as possible and have a dedicated

UI/UX Design team with accessibility as part

oftheir core remit. This year the team carried

out accessibility audits of the Alfa Systems

software, part of a major internal investment

initiative which fundamentally improves the

overall UI and UX of Alfa Systems. A strand of

this work (codenamed Mercury) was informed

by the Web Content Accessibility Guidelines

(WCAG). We have now introduced a UI

framework to the product and all

components added to this framework

willbe WCAG AA-compliant.

Data Security

Each customer’s Alfa Systems environment

is deployed in a Virtual Private Cloud,

completely isolated from all other customers

using Alfa’s hosting services. Our Security-

as-a-Service provider monitors security

event logs 24 hours a day, with high-severity

incidents reported to Alfa within 15 minutes.

Alfa is compliant with ISO27001, ISO27018

and the SOC2 controls for availability,

integrity and confidentiality. We can deploy

Alfa Systems in geographical proximity

tousers while meeting data residency

regulations, ensuring that performance

andcompliance requirements can be met

in the same solution.

The following are just some of the

techniques that we employ to ensure that

we remain ISO27001, ISO27018 and SOC2

compliant in security:

• Encryption at rest and in transit

• Cloud authentication of end-user

credentials

• Continuous monitoring for vulnerabilities

• Routine penetration and disaster

recovery testing

Responsible Development

We are increasingly focused on the

sustainable aspects of our core software product,

and the processes we follow to build it.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Supply Chain

We have an ethical procurement policy

andour key procurement personnel have

been trained in relation to the relevant

requirements and regulations. 2022 saw the

introduction of Alfa’s new Supplier Code of

Conduct. In EMEA, we aim to ensure that our

contractor and subcontractor community

pay London Living Wage to those employees

based in Greater London and UK Living

Wage to those employees based outside

Greater London.

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.

In early 2023 we will launch our improved

supplier approval process, embedding more

ESG factors into supplier selection across Alfa.

Engineering Principles

Towards the end of 2021 we launched our

Purpose and Principles for Building Alfa

Software. These are intended to help guide

our engineers as they build and improve

our core software platform. Example

principles include Keep It Simple,

Collaborate to Illuminate and Start

WithWhy.

2022 saw an increased focus on

theseprinciples, with efforts to link

theprinciplesto our engineering job

descriptions andthus ensure they

feedintoend ofyearappraisals.

Alfa Environmental

AccountingModule

2022 saw further work to confirm the

requirements for an Environmental

Accounting module within Alfa Systems,

including various discussions at our user

group and partner forums. This module will

allow our clients to accurately report on the

greenhouse gas emissions of their portfolio

at the level of individual assets, thus

enabling them to address their own ESG

reporting requirements. Development work

on the new module will commence in 2023

as part of our ongoing programme of

strategic product investment.

Alfa Work Experience case study

This summer, Alfa launched the first Alfa

Work Experience programme.

The employee-led Alfa for Racial Equity

community developed the idea from its

inception at one of our Hackathon

innovation events.

Promoting Diversity & Inclusion, Alfa Work

Experience gives students who would not

normally get the opportunity, a chance to

experience a fintech work environment.

With support from upReach, a charity

thatworks to create the conditions for

undergraduates from less-advantaged

backgrounds to access and sustain top

graduate jobs, we were matched with nine

first and second year university students.

A week of immersive learning

commenced, with the enthusiastic

students gaining insight into different

career roles and key business functions.

They learned skills employers are looking

for, such as: client interaction, pitching

ideas, teamwork, presentation skills,

problem analysis and solving,

organisation and time management,

aswell as communication skills.

Without a big budget or vast resources,

we were able to deliver a rewarding week

for all those involved. Alfa colleagues used

their Volunteering days and support was

provided by all business areas.

The feedback was wonderful!

“Thank you so much for providing this

opportunity! It was definitely one of the

most rewarding experiences I’ve had so far

and I hope to see everyone again soon!”

“I’m just messaging to say that I’ve finished

my work experience week with Alfa and

ithonestly couldn’t have been any better

than it was! It has definitely clarified what

career path I’d like to take and I’m very glad

that I had this opportunity.”

Based on the success of our first Alfa

Work Experience week we intend to

expand a version of this programme

toother Alfa regions next year.

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

Strategic report

Corporate governance Financial statements Other information

Corporate

governance

71 Chairman’sintroductiontogovernance

74 BoardofDirectors

76 CompanyLeadershipTeam

79 Divisionofresponsibilities

81 Boardleadership&Companypurpose

84 Composition,succession&evaluation

87 NominationCommitteeReport

90 Audit&RiskCommitteeReport

97 Directors’RemunerationReport

121 Directors’report

125StatementofDirectors’responsibilities

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Chairman’s introduction

“Our performance alongside the

strategic progress we have made gives

usgreat confidence in Alfa’s prospects

for2023.”

——— Andrew Page, Executive Chairman

Board focus areas in 2022

• Two special dividends totalling 6.5 pence per ordinaryshare.

• Share buyback programme.

• Performance of the business, financiallyand operationally.

• 2023 budget and long-term strategicplan.

• Sales pipeline and business development.

• Enhanced ESGgovernance.

• Establishment of Portugal smart hub.

Dear shareholders,

On behalf of the Board, I am pleased to

present the Group’s corporate governance

report for the year ended 31 December 2022.

This report outlines how Alfa’s governance

has continued to serve the Group and how

robust and appropriate 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 Board Committees: Audit

& Risk Committee, Nomination Committee

and Remuneration Committee. Together,

these give a clear insight into howwe

manage corporate governance principles

and processes within the Group.

2022 performance

Our vision is to grow our company size

naturally, but grow our impact rapidly.

Keyto this is delivering more concurrent

Alfa implementations, more efficiently,

withaworld-class product. We will have

abig company impact, but a small company

feel. During 2022, we continued todeliver

successful implementations, supported by

our scalable and reliable cloud-native hosting

solution, at the same time as releasing

significant enhancements to our software.

Strategic report

Corporate governance Financial statements Other information

Chairman’s introduction continued

The macroeconomic outlook remains

dynamic. The breadth and diversity of Alfa’s

operations help to insulate us from

economic uncertainty in individual

geographies and sectors of our business.

Share buyback and dividend

programme

During 2022 we reviewed the capital

allocation of the Company, taking into

consideration the need to continue to

invest in our people and technology whilst

maintaining strong liquidity. The Board

discussed the appropriate alignment with

the Group strategy and considered our

stakeholders. With this in mind, weinitiated

an 18-month share buyback programme in

January 2022. During the year, the Company

successfully bought back 2,832,073 shares

for £4.65m under the programme, which

equates to approximately 1% of the issued

share capital. We have continued to pay

regular dividends, and theBoard intends to

increase the dividend progressively as the

Group grows, whilst ensuring that we retain

a strong balance sheet. We are pleased to

announce that we are proposing a final

dividend of 1.2p per share and a special

dividend of 1.5p pershare.

Portugal smart hub

With our continued sales success,

strongpipeline and growth ambitions

weunderstand that we must expand our

recruitment reach. In 2022, following a

thorough evaluation we set up a new smart

hub in Lisbon, Portugal. This provides

access to a diverse population of

experienced developers. This repeatable

model gives us access to additional talent

pools outside our principal engineering

centre in London.

Culture

The Board is responsible for setting the

tone from the top and promoting a culture

which creates a positive work environment

where everyone feels respected, motivated

and able to thrive. Our employees are

essential for the delivery of our strategic

objectives and our continued success.

Theirfeedback is critical to the Board and

we continue to monitor our culture through

surveys and town-hall sessions, as well as

formal and informal engagement activities.

With this inmind, we have introduced a new

measure to the Annual Bonus for members

of the Company Leadership Team, which will

measure our employees’ overall

engagement and retention given that our

success as a business is closely tied to our

ability to recruit, retain and engage a highly

talented workforce.

Purpose, people and strategy

Effective leadership is dependent on an

empowered and positive business culture.

Alfa has demonstrated a strong and

long-established purpose, culture and

setof values which collectively anchor

ourobjectives and priorities, even in recent

challenging years. The importance of

culture has been of particular importance

over the past few years. As our workforce

adapts to new ways of working, we as

aBoard must ensure that our colleagues

aresupported to accelerate the growth

ofAlfa.

The Board’s work programme allows

theDirectors to maintain oversight and

governance of all aspects of Alfa’s business

and to play an active role in debating

andexamining forward-looking strategy

and overseeing the management of the

business. Directors work closely with

theexecutive management team,

offeringsupport and robust challenge

asappropriate. The challenges raised by

theongoing global pandemic continued

tobe a focus as the Board considered the

necessary steps needed to protect the

business, stakeholders and in particular our

employees. You can read more about thisin

our section on People on pages 58 to 61.

Our values have been in place for many

years and are firmly embedded in the DNA

of the Company and all that we do, fostering

a strong culture which, combined with

oureffective governance, ensures that

everyone stays focused on delivering our

strategy, whilst staying true to who we are.

Environmental, Social

andGovernance

The Board is committed to our ESG agenda.

At the beginning of the year, we undertook

a review to establish whether oversight of

the Company’s ESG initiatives should

extend the remit of the Nomination

Committee. Following this review, it was

agreed that the Board should remain

astheoverseeing body to ensure

appropriate focus on Alfa’s ESGinitiatives

and objectives. The Boardisadapting its

review process and governance procedures

to ensure that ESGconsiderations are fully

embedded intoour decisions for

sustainable and long-term growth.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

The UK Corporate Governance

Code 2018: Our compliance

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 Corporate

Governance Statement, including the

Nomination Committee, Audit & 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 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.

Looking forward

The Board is delighted that we have

overseen the delivery of exceptional

financial and operational performance

during 2022. Ourperformance alongside

the strategic progress we have made and

the strength of the intellectual property

inour software gives us great confidence

inAlfa’s prospects for 2023.

Alfa continues to excel in its performance

and develop its strategy for the benefit of all

of our stakeholders. There are many people

tothank for the success Alfa has achieved

so far. In particular, Andrew Denton and his

leadership team, for all they have achieved,

and how they have achieved it, and all our

employees for all their dedication and hard

work in 2022.

All members of the Board will stand for

re-election at the Annual General Meeting

(AGM) in April 2023. All Board members

have received a formal performance

evaluation which demonstrates that each

Director continues to be effective and

committed tothe role.

Andrew Page

Chairman

Strategic report

Corporate governance Financial statements Other information

Board of Directors

Andrew Page

Executive Chairman

Appointment to the Board:

May 2017

Andrew Denton

Chief Executive Officer

Appointment to the Board:

April 2017

Duncan Magrath

Chief Financial Officer

Appointment to the Board:

April 2020

Matthew White

Chief Operating Officer

Appointment to the Board:

October 2019

Skills 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.

Andrew has considerable senior

management experience and a deep

understanding of the auto and

equipment finance industry.

Skills and experience

Andrew Denton has been CEO of Alfa

since September 2016, having held

roles as Sales & Marketing Director

and Chief Operating Officer since

hejoined the Company in 1995.

Andrew is Director and joint

founderof the Leasing Foundation,

supporting the leasing and auto and

equipment finance industry through

charitable activities, research and

development. Andrew is an Advisor

to The Women’s Association,

boosting gender equality in the

corporate world, and he is a proud

member of the Board of Trustees for

Professors Without Borders, bringing

top-level educators and global

experts to the doorsteps of

studentsworldwide.

Andrew is a computer scientist by

training, and has considerable senior

management experience and

significant experience in the auto

and equipment finance industry.

Skills and experience

Duncan started his career at

PriceWaterhouse, and qualified

asaChartered Accountant in 1989.

He joined Ocean Group in 1992, and

spent 13 years in the UK and USA 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.

Duncan has extensive experience in

senior financial positions both in the

UK and internationally, including a

deep understanding of investor

relations and financial strategy.

Duncan is a Fellow of the Institute

ofChartered Accountants in England

& Wales.

Skills 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auto and equipment 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.

Matthew has considerable

seniormanagement experience

insoftware development

andallaspects of systems

implementation and delivery.

Other appointments

Director of CHP Software and

Consulting Ltd

Other appointments

Director of CHP Software and

Consulting Ltd

Other appointments

None

Other appointments

None

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Committee membership

Audit Nomination Remuneration Committee chair

A N R

Steve Breach

Independent

Non-Executive Director

Appointment to the Board:

August 2019

Adrian Chamberlain

Independent

Non-Executive Director

Appointment to the Board:

April 2020

Charlotte de Metz

Independent

Non-Executive Director

Appointment to the Board:

April 2020

Chris Sullivan

Senior Independent

Director

Appointment to the Board:

July2019

Skills 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 17

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 advisor to a number

of privately owned companies.

Steve has held a number of

CFOrolesand has extensive

experience in corporate finance.

Skills 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. During

2021, Adrian was appointed as the

Senior Independent Director of the

Trust. 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 was the

Executive Chairman of eConsult Ltd,

a leading cloud-based medical

triagecompany.

Adrian has extensive experience

internationally in both the private

and public sectors, particularly in

strategy formulation and execution,

technology and Software as

aService. He holds an MAin

Historyfrom Trinity College,

Cambridge and an MBA from

theLondon Business School.

Skills and experience

Charlotte is the Chief People

Officerat Keyloop which focuses on

software for the automotive industry

where she joined in early 2021. She

previously served as Chief People

Officer at Synamedia where she led

alarge-scale global transformation.

Prior to that, Charlotte was Executive

Vice President at Finastra, a global

fintech where she was responsible

for Executive Talent, corporate social

responsibility, culture and values,

and inclusion and diversity. Prior

tojoining Finastra in 2012 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.

Charlotte has a strong track record

indeliveringinnovative employee

development, engagement, and

retention practices. She also has

extensive experience in managing

high-impact, enterprise-wide

transformations in challenging,

fast-paced environments.

Skills and experience

Chris was Chief Executive of the

Corporate & Investment Bank at

Santander UK during the years

2015-2018, 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auto and equipment finance

industry, having spent nearly 30

years with the Lombard Group in a

number of directorate roles including

as CEO.

Chris has extensive experience of

corporate, investment and retail

banking andasset financing together

with general management and listed

company experience.

Other appointments

Advisor to a number of

privatecompanies

Other appointments

Senior Independent Director

ofCambridge University Health

Trustand Chair of the

PerformanceCommittee

Other appointments

CPO, Keyloop Limited

Other appointments

Chairman of the Westminster Abbey

Investment Committee, Senior

Independent Director for DWF Group

PLC, Non-Executive Director of

Cannaray Ltd and DVCP Limited

Strategic report

Corporate governance Financial statements Other information

Company Leadership Team

Andrew Denton

Chief Executive Officer

Date joined Alfa

August 1995

Duncan Magrath

Chief Financial Officer

Date joined Alfa

March 2020

Matthew White

Chief Operating Officer

Date joined Alfa

June 1999

Richard Dewire

Chief Revenue Officer

Date joined Alfa

January 2001

Vicky Edwards

Chief People Officer

Date joined Alfa

March 2020

Relevant experience/

previousroles

Richard has over 20 years in the auto

and equipment 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.

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

Date joined Alfa

February 2005

James Paul

Chief Delivery Officer

Date joined Alfa

September 1999

Relevant experience/

previousroles

Andrew brings over 35 years of

programming experience, over

25 years in commercial software

development and over 15 years

inthe auto and equipment 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

auto and equipment finance for

organisations of all sizes.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Our governance framework

Our corporate governance framework clearly defines responsibilities and ensures that the Group has the right systems and controls to

enable the Board and its Committees to effectively oversee the business, providing challenge where necessary.

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 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 & Risk Committee Nomination Committee Remuneration Committee

Provides independent assessment and

oversight of financial reporting processes.

It oversees, on behalf of the Board, the

riskmanagement strategy, risk appetite

and the effectiveness of internal

controlprocesses. It also oversees

theeffectiveness of the internal and

externalaudit functions.

Reviews the size, composition, tenure and

skills of the Board. It also leads the process

for new appointments, monitors Board

and senior management succession

planning, reviews the talent pipeline

andtalent management, and considers

independence, diversity and inclusion

andgovernance matters.

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.

Company Leadership Team

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.

Governance Committees

These governance committees are chaired by a member of the Company Leadership Team and report to the Company Leadership

Team, 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.

Governance framework

Half of the Board is made up of Independent Directors whose diverse experience enables 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 pages 48 to 53 and this framework supports our Directors’ compliance with

their duties.

Strategic report

Corporate governance Financial statements Other information

How the Board engages

Board engagement

A fundamental role of the Board is to

consider the balance of interest between

our stakeholders including shareholders,

our customers, our colleagues and the

communities in which we operate. For

details of the Board’s role in stakeholder

engagement which supports the Directors’

duties section 172(1) of the Companies Act

2006, see pages 48 to 53.

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 48 to 53 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.

The Chairman of the Board, CEO and CFO

hold regular meetings with existing and

potential institutional investors and analysts

to understand their views and policies.

These meetings cover a range of topics,

including our long-term strategy, operational

and financial performance and increasingly

broader societal issues. The Board receives

regular updates to ensure itconsiders the

views of shareholders.

Employee engagement

The Board monitors and assesses

engagement with all stakeholders,

withparticular attention on employee

engagement. Employee Pulse surveys

provide regular understanding of wider

views and an ‘open door’ approach to

feedback and communication also allows

for frequent two-way conversation and

insight. Efforts continued during 2022, to

maintain culture and connections with

online events as well as in-person social

elements to these events wherever

restrictions allowed. All Board meetings

feature updates on People matters and

engagement levels. The Chief People

Officerpresented to the Board in 2022,

demonstrating the increased importance

placed on our people. Online and in-person

town-hall events (including Q&A) with the

Board as well as Company updates and

frequent coordinated internal

communications allsupport engagement

across the organisation. Given the Board’s

visibility ofthe engagement channels and

efforts, aswell as its accessibility to the

workforce through the initiatives and events

as mentioned, it is confident at this time

that appropriate effective measures are in

place as an alternative to Provision 5 of the

2018 UK Corporate Governance Code. We

believe that our strong culture isaunique

strength and we see the benefits in

employee engagement, retention

andproductivity.

Stakeholder engagement

The Board is accountable to stakeholders

for ensuring the Group is appropriately

managed and achieves its objectives in a

way that is supported by the right culture

and behaviours. The Board spends time

understanding the views of its key

stakeholders when discussing matters

atBoard meetings, these views form an

integral part of decision-making. The

AnnualGeneral Meeting provides a valuable

opportunity each year for shareholders

tohear from the Board, and for the Board

to hear from our shareholders. The Board

looks forward to meeting with and hearing

from shareholders at the AGM this year.

Our dedicated Stakeholder Engagement

and section 172 statements on pages 48

to53 set out how the Board engages

withand balances the interests of

stakeholders. A detailed overview of the

Board’s engagement with the workforce

isset out on page 52.

Our governance framework continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

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.

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;

• 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.

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. All Directors have access

to the advice of the CompanySecretary

and, in appropriate circumstances, may

obtain independent professional advice

atthe Company’s expense. In addition,

aDirectors’ and Officers’ liability insurance

policy is maintained for all Directors and

each Director has the benefit of a deed

ofindemnity. The appointment and removal

ofthe Group Company Secretary is a matter

for the Board as a whole.

Matters Reserved for

theBoard

The Board has adopted 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.

The Company Secretary, through the

Chairman, is responsible for advising

theBoard on all governance matters and for

ensuring that Board procedures are followed,

applicable rules and regulations are complied

with, and that due account is taken of relevant

codes of best practice. The Company

Secretary is also responsible for ensuring

communication flows between the Board

andits Committees, and between senior

management and Non-Executive Directors.

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 is essential to Alfa’s continued

success. The Board recognises the value of,

and supports, significant investment of time

and resources in our colleagues 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 Policy

(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. Whistleblowing

andincident reporting mechanisms are

inplace to allow issues to be formally

reported andinvestigated.

Division of responsibilities

Strategic report

Corporate governance Financial statements Other information

Division of responsibilities continued

The Board has a clear division of responsibilities between the Board and the business. The roles of the

Chairman, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Senior Independent

Director and independent Non-Executive Directors are set out in separate role statements.

Role Principal responsibilities

Executive Chairman

Andrew Page

The Chairman is responsible for the effective leadership of the Board and maintaining a culture of

openness and transparency at Board meetings. The Chairman also promotes effective communication

between Executive and Non-Executive Directors and ensures all Directors effectively contribute to

discussions and feel comfortable in engaging in healthy debate and constructive challenge. The

Chairman ensures all Directors receive accurate, timely and clear information to assist them to make

their decisions, identifying training and development needs as required.

Chief Executive Officer

Andrew Denton

The Chief Executive Officer has day-to-day responsibility for the effectivemanagement of Alfa

andfor ensuring that Board decisions are implemented. They play a key role in defining and guiding

the strategy, once agreed by the Board, whilst ensuring the successful delivery against the strategic

plan and other key business objectives, allocating decision-making and responsibilities accordingly.

The CEO is also tasked with providing regular operational updates to the Board on all matters of

significance relating to the Group’s operations and for ensuring effective communication with

shareholders and other key stakeholders. The CEO identifies and executes new business

opportunities and assesses potential acquisitions and disposals.

He manages the Group with reference to its risk profile in the context of the Board’s risk appetite

andis responsible for the oversight of the Environmental, Social and Governance (ESG) initiatives.

Chief Financial Officer

Duncan Magrath

The Chief Financial Officer has overall responsibility for management of the financial risks of the Group.

The CFO is responsible for financial planning and record-keeping, as well as financial reporting to the

Board andshareholders. The CFO 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. The CFO has responsibility for the

ESG reporting.

Chief Operating Officer

Matthew White

The Chief Operating Officer is responsible for day-to-day operational activities. The COO plays a

keyrole in developing key business operational models, monitoring performance against KPIs and

ensuring adequate staffing recruitment to deliver development and systems implementation. The

COO is responsible for software development, systems implementation delivery and the delivery

ofHR resourcing and planning.

Senior Independent

Director

Chris Sullivan

The Senior Independent Director provides a sounding board for the Chairman and acts as an

intermediary for the Non-Executive Directors. TheSenior Independent Director is available to

shareholders should they have any concerns, where communication through normal channels has

not been successful or where such channels are inappropriate. The Senior Independent Director

meets with the Non-Executive Directors at least annually when leading the Non-Executive Directors’

appraisal of the Chairman’s performance.

Non-Executive

Directors

Steve Breach

Adrian Chamberlain

Charlotte de Metz

The Non-Executive Directors bring insight and experience to the Board. They have a responsibility

toconstructively challenge the strategies proposed by the Executive Directors; scrutinise the

performance of management in achieving agreed goals and objectives; and play leading roles

inthefunctioning of the Board Committees, bringing an independent view to the discussion.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Board

Risk management

and internal

controls

Major capital

commitments

Approval of

Annual Report and

Accounts

Company’s

purpose, values,

vision and culture

Corporate

governance

including Board

and Committee

evaluation

Material

acquisitions

and disposals

Engagement with

key stakeholders

Business

strategy and

approval of

long‑term

aims and

objectives

Group

financial

reporting

and results

announcements

Board leadership and Company purpose

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 six scheduled meetings in

2022 and a strategy meeting, which included

presentations by a member of the CLT on

Board and Committee meetings and attendance

Board

Audit & Risk

Committee

Nomination

Committee

Remuneration

Committee

Andrew Page 6/6 2/2

Andrew Denton 6/6

Duncan Magrath 6/6

Matthew White 6/6

Steve Breach 6/6 4/4 2/2 4/4

Adrian Chamberlain 6/6 4/4 2/2 4/4

Charlotte de Metz 6/6 4/4 2/2 4/4

Chris Sullivan 6/6 4/4 2/2 4/4

each of the business areas. During theyear,

the Board and its Committees conducted

each meeting in person, with Directors

attending remotely if necessary, enabling

the Board to continue to function and

maintain the integrity of our governance

structure. Papers for meetings are

circulated in advance, and so in the

eventthat a Director is unable to attend

ameeting they have the opportunity before

the meeting takes place to discuss any

agenda items with the Chairman.

Non-Executives meet without the Chairman

at least annually to appraise the Chairman’s

performance and the Chairman also holds

meetings with the Non-Executive Directors

without the Executive Directors being

present. The table below records thenumber

of meetings held by the Board andeach

Committee during 2022 and thenumber of

meetings attended byeachmember. There

was100% attendance at eachmeeting.

The Board is responsible for providing

overall direction for management, debating

strategic priorities and setting Alfa’s culture

and values. 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 for sustainable long-term

value. The Board receives updates on key

elements of the People strategy which

provides insight into a variety of areas

including culture, diversity, inclusion, talent

management, future capability, succession

planning and colleague engagement. 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.

Strategic report

Corporate governance Financial statements Other information

Board leadership and Company purpose continued

The Board has overall responsibility for

ensuring adequate resource is available to

deliver onits strategic priorities. The Board

has established a risk management

framework to manage and report the risks

we face as abusiness, which are reviewed

on at least anannual basis. The Board also

undertakes a robust assessment of the

Company’s emerging and principal risks.

Efficient internal reporting, effective internal

controls and oversight of current and

emerging risks are embedded into our

business processes, which align to our

strategic priorities, purpose and values. The

Board, with the support of its Committees,

places great importance on ensuring we

achieve a high level of governance across

the Group.

Shareholders’ 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 2022,

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.

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 123 of the

Directors’report.

Promoting a positive culture

The Board recognises the importance of a

good culture and the role it plays in delivering

the long-term success of the Company. Alfa

employees want to work for a company that

values them and provides them with the

opportunity to be themselves and to thrive.

The Board and CLT strive to create a positive

culture at Alfa, providing employees with

the opportunity to grow, experiment and

innovate in an inclusive environment.

To create the right culture, it is important

that employees live and breathe Alfa’s

values, and this starts with our leaders.

TheBoard sets the tone from the top to

demonstrate and promote these values,

which are a critical element in achieving

ourpurpose of knocking down barriers so

everyone can thrive. The Board uses several

tools to monitor the culture, through

surveys, town-hall sessions, formal and

informal engagement activities.

Strategy

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.

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 69 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. This

brings focus to strategic objectives and

translates into better decisions, driving

competitive advantage, stronger

performance and a sustainable business

model. The Board and 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

to understand what they experienced

during the sales process and through the

various stages of software implementations

and provision of services.

Corporate governance

framework

Having an effective corporate governance

framework defines responsibilities, helps

theBoard to deliver the Group’s strategy

and is vital to its decision-making. It supports

long-term sustainable growth while

operating within a framework of effective

controls. Having the right systems and

controls in place ensure the Board and

itsCommittees effectively oversee the

business, maintain the highest standards

ofcorporate governance and allow Directors

to provide challenge where necessary.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Our strategic priorities

Strengthen – Grow our differentiation

of market-leading People, Product and

Delivery.

Simplify – Simplifying our product,

implementations and processes

toenablemore concurrent Alfa

Systemsimplementations.

Sell – Focus on cloud-hosted,

subscription sales to our

targetmarkets.

Synergise – Develop our partner

ecosystem, to improve our sales

opportunities and to enable more

concurrent Alfa Systems implementations.

Scale – Increase our capacity

fordeveloping and delivering

AlfaSystems.

Start – Improve our offering for

smaller autoand equipment finance

providers as aplatform forinnovation

and to increase ourreach.

2 3

5 6

Board activities and key discussions in 2022

The table below sets out the key areas of Board focus during the year and how these align with the Group’s strategy. It also sets out which of

Alfa’s key stakeholders have been considered and are relevant in the Board’s discussions.

Focus area

Key

stakeholders Activities

Link to

strategic

priorities

Strategy and

operations

see pages

1to69

Customers

Employees

Partners

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.

Leadership,

people

andculture

see pages

12to15 and

58 to 61

Employees

Investors

• 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.

2 3

Finance

see pages

34to37

Customers

Employees

Community and

Environment

Partners

Investors

• 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 and final 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.

• Developing and monitoring ESG reporting framework.

Governance

see pages

71 to125

Employees

Customers

Investors

• 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

and setting actions.

• Approving updated Committees’ Terms of Reference.

• Receiving and considering feedback from shareholder engagement.

• Reviewing and approving the modern slavery statement.

1 4 6

The Board continued to monitor and oversee the activities and performance of Company Leadership Team in delivering against the

targetand aims that we have communicated to the market. Throughout 2022, the Board reflected on the activities for the talent pipeline,

wellbeing and employee engagement. The Board approved two special dividends totalling 6.5p per ordinary share and in addition the

commencement of the share buyback programme taking into account factors including the current cash balance, forecast cash flows,

andensuring the maintenance of a strong credit rating.

Strategic report

Corporate governance Financial statements Other information

Composition, succession and 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.

We consider that skills and experience

ofour individual Directors, particularly in

the area of financial services, people and

software, are fundamental to the pursuit

ofour objectives. In addition the experience

of Directors in a variety of sectors and

markets are invaluable toAlfa.

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. This report and

in particular the Board biographies on pages

74 to 75 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, in part,

on its review of the results from the Board

evaluation process outlined on the next

page, 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.

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 74 to 75. 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 their duties to the Company and

theirprivate interests and/or other duties.

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.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Board evaluation

To ensure the Board remains effective, a

performance evaluation is carried out each

year to review the effectiveness of the Board,

its Committees and Directors. The Board

recognises the benefit of a thorough

evaluation process to reflect on its strengths

and the challenges it faces, and to identify

opportunities to continuously improve

itseffectiveness.

In accordance with the Code, the Board

hasathree-year cycle for evaluations of its

performance. In 2021, the Board appointed

an external evaluator to undertake the Board

performance review, the results ofwhich are

set out in full in the 2021Annual Report.

Following the external evaluation in 2021,

the evaluation for 2022 was conducted

bythe Company Secretary in conjunction

withthe Chairman. The Directors were

askedto complete a detailed Board

performance evaluation questionnaire

toassess the performance of the Board

andthe Committees over the year. 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

2021 Review 2022 Review

Outputs from 2021 Update on actions Outputs from 2022 Board agreed actions for 2023

• Deeper dives into our

Peoplestrategy

The CPO provided updates

onthe People strategy and

talent management

Board to engage in more

dynamic discussion

Ensure sufficient time is allowed

in the agenda for thorough

consideration of difficult topics

• Increased engagement

withemployees

There have been opportunities

for the Board to interact more

with the wider workforce

Deeper insight into market

conditions, trends, customer,

and competitor behaviours

Include on the strategy agenda

a thorough review of the market

and competitors

• Informal interaction with

seniormanagement

A cycle of CLT presentations

were incorporated in the

Board’s agenda

Review and refresh the Board

and Committee papers

Refresh the structure of the

Board papers

• Forward programme of

workincorporated into

theBoard agenda

A forward planner was

established for the Board and

each of its Committees

Further engagement

withoverseas offices

andAlfacustomers

Consider whether a customer

should be invited to attend a

Board meeting

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.

The evaluation confirmed that there

wasastrong emphasis on the welfare

ofemployees, with active consideration

offairness to employees and their

rewardsand a recognition of the

needtosupport wellbeing.

The results were presented and discussed

at the December 2022 Board meeting.

TheBoard also discussed the progression

of the key outcomes identified in the 2021

external evaluation, recognising that a

continuous approach to improvement

willcontinue to deliver good governance.

The overall conclusion of the evaluation was

that the Board and its Committees remain

strong and effective, with a clearly defined

role and purpose. The evaluation found that

the Board is chaired well, demonstrated

byBoard discussions which were rigorous

and open, combined with constructive

challenge, allowing for diversity of opinion.

Directors’ performance

During the year, the Chairman holds

regularmeetings with individual Directors

atwhich, among other things, their

individual performance is discussed.

Informed by the Chairman’s continuing

observation of individual Directors during

the year, these discussions form part of the

basis for recommending the appointment

and reappointment of Directors at the

Company’s AGM, and include consideration

ofthe Director’s performance and

contribution to the Board and its

Committees, their time commitment

andthe Board’s overall composition.

Chairman’s performance

In accordance with the UK Corporate

Governance Code, Chris Sullivan, as Senior

Independent Director, led a review of the

Chairman’s performance by the Directors.

The review concluded that the Directors

were satisfied with the Chairman’s

performance and that he continues

tooperate effectively.

Strategic report

Corporate governance Financial statements Other information

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 2022, 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. The Board is mindful of the

aims of the FTSE Women Leaders Review

ongender and the Gregor Smith Review,

which aim to improve gender and ethnic

diversity on Boards. 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CLT.The Board considers that

eachDirector is able to allocate sufficient

time to the Company to discharge their

responsibilities effectively.

Composition, succession and evaluation continued

Executive Chairman 12.5%

Executive 37.5%

Independent 50%

Male 87.5%

Female 12.5%

Male 68%

Female 31.5%

Non-binary 0.5%

Male 81%

Female 19%

40-49 25%

50-59 50%

60-69 25%

2-3 years 37.5%

3-4 years 37.5%

5-6 years 25%

Diversity overview

Board composition

Gender diversity Board Gender diversity

Company-wide

Average age of the Board

Gender diversity

Senior manager

Board tenure

Alfa gender balance is captured through voluntary and confidential self-disclosure.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Nomination Committee Report

Principal activities in 2022

• Considered the results of the 2022

Nomination Committee evaluation.

• Reviewed the structure, size and

composition of the Board and

itsCommittees.

• Considered wider elements of

successionplanning for the 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 2023

• Monitor Board composition for

alignmentof relevant skills, experience

and diversity to Company strategy.

• Oversight of the CLT’s development

andsuccession planning.

Introduction

On behalf of the Board, I am pleased to

present our Nomination Committee Report

for 2022, which summarises our key

activities during the year.

During 2022, the Committee continued

torecognise the importance of building

anexperienced, effective and open

Boardworking together with the Company

Leadership Team (CLT) to achieve Alfa’s

strategic objectives. The Committee

ensures that the Board and the CLT

havethe right balance of skills, knowledge

and experience to both discharge their

responsibilities and to respond

appropriately to emerging challenges

andopportunities. With this in mind,

theCommittee continued its succession

planning for the Board, Executive Directors,

CLT and considered Alfa’s approach to the

development of the wider talent pipeline

and in particular, key senior management.

The Committee acknowledges the

importance that growing talent internally

plays in the Company’s diversity ambitions,

which is encouraged by each of the

Directors to contribute to the development

of a diverse range of future leaders.

TheCommittee increased its focus on

thetalent management and development

of all Alfa employees.

As mentioned in Chairman’s introduction,

the Committee reviewed its remit to consider

evolving the Committee to oversee the ESG

arena. In conjunction with the Board, it was

decided that the Board would continue to

focus on ESG requirements and oversee

the extensive programme of activities and

initiatives the Company has undertaken

toaddress its ESG commitments.

The Committee is conscious that currently

female representation is less than the

required 33% (40% by December 2024)

andall future appointments will be made

bearing in mind the Committee’s ambition

to achieve appropriate diversity targets.

Chris Sullivan

Nomination Committee Chair

Role of the Committee

The Committee comprises the Executive

Chairman and the Non-Executive Directors

and is chaired by Chris Sullivan, the Senior

Independent Director. Further information

on the skills and experience of all

Committee members can be found on

75.The Committee’s performance was

reviewed as part of the 2022 internal Board

and Committee effectiveness review, which

is detailed on page 85. The evaluation

established that the Committee functions

well in terms of planning succession to

Board roles, Company Leadership Team

and the future talent pipeline.

“During 2022,

theCommittee continued

torecognise the importance

ofbuilding an experienced,

effective and open Board

working together to achieve

Alfa’s strategic objectives.”

—— Chris Sullivan, Nomination

Committee Chair

Meetings held during 2022

Member

since

Meetings

attended

2022

Chris Sullivan 2019 2/2

Steve Breach 2019 2/2

Adrian

Chamberlain 2020 2/2

Charlotte de Metz 2020 2/2

Andrew Page 2017 2/2

The full Terms of Reference for the

Committee are reviewed annually and

can be found at: www.alfasystems.com/

en-eu/investors/governance.

Strategic report

Corporate governance Financial statements Other information

Committee role and

membership

The Nomination Committee is responsible

for ensuring the composition and structure

of the Board remains effective, balanced

and optimally suited to the Company’s

strategic priorities. In practice this involves

overseeing the nomination, induction,

evaluation and orderly succession of

Directors. 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 also

ensures the Company’s governance

structure facilitates the appointment and

development of effective management

thatcan deliver shareholder value over

thelong term.

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 will make a

proposal to the 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.

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. 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.

The Committee embraces the importance

ofinclusion and diversity and supports the

revised recommendations of FTSE Women

Leaders Review on gender and the Parker

Review and the Gregor Smith Review, which

aim to improve ethnic diversity on Boards.

However, we acknowledge that currently

ourBoard does not comply with the

recommendations and recognise that there

isalways more we can do. Alfa will continue

towork to build a more inclusive workplace

atall levels of the Company. The Committee

supports the Inclusion and Diversity

initiatives set by the Company, and recognises

that the Company is evolving in this space.

During 2022, the Company achieved a target

of 30% diversity across all new hires. It

continues to aspire to achieve a 50:50

male:female ratio for graduate recruitment.

Recruitment is continually reviewed to ensure

equality during theprocess.

Succession planning

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. The Committee

undertakes comprehensive reviews of the

leadership needs of the Company, 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. In addition, the Committee

reviews the succession plans for the CLT

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. The Committee has ensured

that there are plans in place for short and

medium-term succession for the Board

andCLT.

The Committee considers the

implicationsof the requirements

relatingtothe development of a diverse

pipeline for succession for the Board and

the CLT contained within the 2018 Code.

Discussions were held about initiatives

taken to increase the diversity in the hiring

process, including drawing on NEDs’

experience in other organisations of

attracting diverse talent.

Nomination Committee Report continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Independence

During 2022, 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 2022.

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.

Skills evaluation

The Board is satisfied that it has the

appropriate range of skills, experience,

independence and knowledge of the

Company to enable it to effectively

discharge its duties and responsibilities.

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. Additional training

isavailable on request, where appropriate,

so that Directors can update their skills

andknowledge as applicable. 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 new

external appointments in relation to the

Executive Directors during 2022.

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.

Election and re-election

ofDirectors

The re-election 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

2023 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.

Chris Sullivan

Chair, Nomination Committee

1 March 2023

Strategic report

Corporate governance Financial statements Other information

Audit and Risk Committee Report

Principal activities in 2022

• Reviewed the 2021 year-end financial

statements and Annual Report.

• 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 2022 internal

audits and considered the 2023 internal

audit plan.

• Review of Information and Cyber Security.

• Reviewed findings from an internal audit

review of ESG.

• Tax compliance status review.

• Reviewed Internal & External

Auditeffectiveness.

• Considered key accounting matters.

Areas of focus for 2023

• Continue to monitor legislative and

regulatory changes that may impact

thework of the Committee.

• Continue with oversight of internal audit

activities and findings.

• Continue oversight of the Company’s

riskmanagement framework.

• Monitor the continued progressive

enhancements to Alfa’s systems and

internal controls across all key functions

of the business.

Dear shareholders,

I am pleased to present our Audit and Risk

Committee Report for the year ended 31

December 2022. The Report explains the

work of the Committee during the year, as

well as setting out expected key areas of

focus for 2023.

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.

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

continued to spend 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.

The Company has continued to make strong

progress during the year, incrementally

improving the efficacy and efficiency of its

governance and control frameworks, and

further enhancing insightful management

information across its business.

Alongside core financial controls, Alfa’s

cyber and information security resilience

iscritical. The Committee has continued

topay close attention to management’s

work to enhance Alfa’s cyber security

control environment.

Committee members’ skills and experience

are set out on pages 74 to 75. 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 auto and

equipment finance and enterprise software

sector and corporate governance.

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

“Alfa has continued

toimprove the efficacy

andefficiency of its

controlframeworks, and

hasfurther enhanced its

insightful management

information toolkit.”

—— Steve Breach, Chair of the

Audit and Risk Committee

Attendance at meetings

Member

since

Meetings

attended

2022

Steve Breach

(Chair) 2019 4/4

Adrian

Chamberlain 2020 4/4

Charlotte de Metz 2020 4/4

Chris Sullivan 2019 4/4

The Committee’s members are all

Independent Non-Executive Directors.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

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

www.alfasystems.com/investors/governance.

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.

• Providing advice on whether the Annual

Report and Accounts, taken as a whole is

fair, balanced and understandable.

Meetings

During the year, the Committee met four

times and met privately with the external

auditor once. 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 2022,

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.

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 six months ended 30 June

2022 and year ended 31 December 2022.

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.

Strategic report

Corporate governance Financial statements Other information

Area of focus Assessment Review of the Committee

Conclusion/

Actiontaken

Revenue

recognition

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. Contract modifications

also occur from timeto time.

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. Estimates

areapplied in this assessment

forexample when assessing

thestandalone selling price.

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, including key sources of

estimation uncertainty, 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 Committee agreed with

the revenue judgements

and key sources of

estimation uncertainty

adopted by management.

Development

costs

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 regular

assessments of the development

work that has been undertaken to

determine if it meets the criteria set

out in IAS38 for capitalisation.

The Committee reviewed reports from

management detailing the costs that

hadbeen identified as appropriate

forcapitalisation.

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 in both

thehalf-year and full-

yearresults.

Audit and Risk Committee Report continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Area of focus Assessment Review of the Committee

Conclusion/

Actiontaken

Goodwill and

carrying value

ofinvestments

The Group has goodwill on its

balance sheet and the Company

holds investment in subsidiaries.

These need to be reviewed annually

to assess whether the recoverable

amount exceeds the book value,

andin the case of investment in

subsidiaries also to see if a previous

impairment should be reversed.

The Committee reviewed and challenged

management’s impairment assessment.

The Committee agreed that

no impairment (or reversal

of impairment) was required

in the current year for both

goodwill and the carrying

value of the investment

insubsidiaries.

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.

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 2023 budget

and also plans for 2024 and2025.

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 as

disclosed on pages 41 to 45 in the

Strategic report.

The Committee discussed and challenged

the downside scenarios modelled as part

of the Viability statement as disclosed on

pages 46 to 47 in the Strategic report, the

funding headroom available, the feasibility

of mitigating actions, the dividend policy

and share buy-back programme, 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2022 financial statements.

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.

Strategic report

Corporate governance Financial statements Other information

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 February 2023

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;

• Disclosures in relation to Task Force

onClimate Related Financial

Disclosures(TCFD);

• 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

135 to 174;

• the Company’s business model, as

described on pages 18 to 19; and

• the Company’s strategy, as described

on pages 22 to 31.

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 38 to 40. The principal risks

and uncertainties facing the Company are

addressed in the Strategic report in the

table on pages 41 to 45. 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.

• Controls in respect of financial reporting

and the production of the consolidated

financial statements are well established.

Group accounting policies are

consistently applied and review and

reconciliation controls operate effectively.

• The Finance Manual which outlines key

control procedures and policies to apply

throughout the Company and Group.

This includes clearly defined policies and

escalating authorisation levels for all

procurement activity including capital

expenditure andinvestment.

During 2022 the Board, through the

Committee, has continued to monitor the

Company’s risk management and internal

control and it has also reviewed their

effectiveness. Throughout 2022 Alfa’s

financial, operational and compliance

controls continued to operate as intended.

As noted elsewhere, the Committee

reviewed carefully the Internal Auditor’s

assessment of Alfa’s fraud resilience.

Audit and Risk Committee Report continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

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 at 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

2022 included the following areas of focus:

• ESG review

• Fraud resilience review

• Data protection review

• Cyber security

• Business Continuity and IT

DisasterRecovery

• Capacity Planning

• Revenue and Accounts Receivable

• Follow up on prior recommendations.

The Committee performed an effectiveness

review of internal audit during the year.

As part of this 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).

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, which

was updated in the year, 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 2022,

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.

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 2022 audit and is satisfied

with the quality of these documents.

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.

Strategic report

Corporate governance Financial statements Other information

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 46

to47. 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 37 and confirmed its

satisfaction with the testing methodology.

Assessment of the

effectiveness of the

Committee

The Committee’s effectiveness in respect

of2022 was evaluated as described on page

85. 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 2023

In 2023, 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. The Committee

will also continue with oversight of internal

audit activities and findings as well as

monitoring the continued progressive

enhancements to Alfa’s systems and

internal controls.

Steve Breach

Chair, Audit and Risk Committee

1 March 2023

Audit and Risk Committee Report continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Remuneration Report

Committee activities

during 2022

The key activities undertaken during the

year were as follows:

• Reviewing remuneration of the Executive

Directors and members of the Company

Leadership Team (including salary,

benefits and variable incentives).

• Reviewing and approving the performance

outturns against the financial andnon-

financial measures for the 2021 Annual

Bonus, and approving payouts.

• Reviewing and approving the 2022

Long-Term Incentive Plan proposal

andgrant.

• Reviewing and approving the 2022 Annual

Bonus framework and measures, and

award opportunities.

• Approving the 2021 Directors’

Remuneration Report, including

theGender Pay Gap report and CEO

payratio.

• Overseeing employee share plans,

including the UK (ShareSave) and

US(ESPP).

• Reviewing the Terms of Reference.

The full Terms of Reference for the

Committee can be found at: www.

alfasystems.com/investors/governance.

Introduction

On behalf of the Remuneration Committee,

Iam pleased to present our Remuneration

Committee Report for 2022, which

summarises our key activities during

theyear.

This Report complies with the requirements

of the Large and Medium-sized Companies

and Groups (Accounts and Reports)

Regulations 2008 as amended in 2013,

theprovisions of the 2018 UK Corporate

Governance Code, the Companies

(Miscellaneous Reporting) Regulations

2018, the Companies (Directors’

Remuneration Policy and Directors’

Remuneration Report) Regulations

2019,and the Listing Rules.

Our performance

Alfa has performed strongly both

operationally and financially in 2022.

Duringthe year the Board upgraded

estimates to shareholders and continuing

strong cash generation has enabled us

topay two special dividends along with

theregular dividend to shareholders.

Our People

During 2022, we have continued embedding

our transition to smart working and

becoming a successful hybrid workforce. This

provides added flexibility for our employees

experience, reflecting the changes to the

wider working environment as we exited

from the prolonged periods oflockdown.

More generally, the Committee maintains

an active role in monitoring pay and

practices across the wider workforce.

TheCommittee receives updates from

theGroup’s Chief People Officer on our

People strategy and talent management,

which provides valuable input into the

Committee’s decision-making around

Executive Director remuneration.

We are pleased with the continued progress

made during the year in these important

areas, and look forward to further

development in the future.

2022 Incentive outcomes

As a result of Alfa’s continued strong

performance, the Committee approved

annual bonus payments for Duncan Magrath

and Matthew White in respect of 2022.

Thisoutcome is echoed by our profit share

scheme, which distributes just over 10%

ofthe Company’s profits among employees.

The strong financial performance in 2022

increased the total cost of the payment

to£3.5m (2021: £3.1m). In reaching this

decision, theCommittee considered the

formulaic outcome against the targets set

atthe start of the year, and the broader

underlying performance of the Company.

Inaccordance with the Remuneration

Policy,50% of the bonus earned by Duncan

Magrath and Matthew White will be paid

incash, and 50% will be deferred in Alfa

shares for threeyears.

“Given our success as a

business is closely tied to our

ability to recruit, retain and

engage a highly talented

workforce, we have introduced

an ESG measure to our Annual

Bonus to drive retention

andengagement.”

— Adrian Chamberlain, Chair of the

Remuneration Committee

Meetings held during 2022

Member

since

Meetings

attended

2022

Adrian Chamberlain 2020 2/2

Steve Breach 2019 2/2

Charlotte de Metz 2020 2/2

Chris Sullivan 2019 2/2

Strategic report

Corporate governance Financial statements Other information

Remuneration Report continued

With regard to the Group’s longer-term

incentives, performance conditions

attached to Long-Term Incentive Plan (LTIP)

awards made on 3 June 2020 were tested

to31December 2022. The award is based

equally on growth in EPS and Total

Shareholder Return (TSR). TSR over the

three-year period was 106% which ranked

Alfa at the 95th percentile against its

benchmark. EPS growth over the same

period was 137%. This strong three-year

performance led tofull payouts being

warranted for both measures. Accordingly,

these awards will vest in full in June 2023,

and will be subject toa mandatory two-year

holding period. Further details, including

the value of these awards, are included

onpage 112.

The Committee is satisfied that overall

payoutcomes in respect of the year ended

31December 2022 are appropriate and

reflect Alfa’s continued exceptional financial

and operational performance, and the

experience of all key stakeholder groups.

The annual bonus outcome for the year

reflects another strong year of profit

growth, while vesting of the awards granted

under the 2020 LTIP reflects long-term,

strong performance forshareholders

during the period. The Committee has

therefore not exercised any discretion in

relation to its assessment of the outcome

ofthe variable pay schemes, or to overall

remuneration levels this year.

The Remuneration Policy

andimplementation

As required by the reporting regulations,

the Remuneration Policy was submitted

toabinding vote at the 2021 AGM. During

2022, the Committee debated the existing

remuneration arrangements. On balance

we decided that the current approach

remained well suited to Alfa’s strategic

intentions. Nochanges are proposed to

thePolicy thisyear and accordingly, our

approach toremuneration in 2023 will be

in-line with 2022. Further details on our

Remuneration Policy are described on

pages 100 to 107.

As stated in the 2021 Remuneration Report,

the Chairman and CEO requested that the

Committee approve their proposal to reduce

their salaries to the legal minimum level, and

waive their rights to an Annual Bonus or LTIP.

Both the Chairman and CEO are significant

shareholders in the Company and expressed

a desire to align their future remuneration

with those of the other shareholders. The

proposal was accepted and the salaries for

the Chairman and CEO continue to be

aligned to the National LivingWage.

All variable remuneration will continue

tobesubject to appropriately stretching

performance targets, which are set to

reflect the risk appetite of the business with

a focus on delivery of long-term sustainable

performance. Variable pay elements are

also subject to:

a. Recovery provisions to safeguard

againstpayments for failure;

b. Performance underpins; and

c. Scope for the Remuneration Committee

to exercise discretion where outcomes

are deemed inappropriate in the context

of wider business performance.

2023 – Looking ahead

We have undertaken our annual review

ofthe Executive salaries and awarded

a5%salary increase to the CFO and COO

(effective 1 January 2023). This is the

firstsalary increase awarded since their

appointment to the Board in 2020 and 2019

respectively. The Chairman and CEO have

agreed to have their salaries tied to the

national living wage, which has increased

by8%. Inaddition, following a review of

theoverall compensation of the Executive

Directors, the Committee determined

thatMatthew White, as COO, has been

invaluable to Alfa’sstrategic development,

and his bonusopportunity would be

increased from 100% to 125% of salary to

align his bonus opportunity with the CFO.

2023 Annual Bonus

The annual bonus will operate on a similar

basis as last year, with an additional ESG

measure incorporated for 2023. Maximum

opportunities are 125% of salary for the

CFO and, as noted, the annual bonus

opportunity for the COO has been

increased to 125% of salary. Half of

anyamounts earned will be deferred in

shares for three years.

Reflecting on the evolving ESG landscape,

we have introduced an additional measure

to the annual bonus for 2023. This is the

Company’s first step to include ESG metrics

and we have started with a people

measure, assessing overall employee

retention and engagement, given our

success as a business is closely tied to our

ability to recruit, retain and engage a highly

talented workforce. As we move forward,

the Committee will keep under review the

options to broaden our ESG targets to

include other measures which are aligned

to our strategy. We believe any metric

usedshould be quantifiable, measurable

and ideally externally comparable. As our

benchmarking and measurement of these

metrics matures we will also consider

whether the ESG targets should be included

in our annual bonus scheme, our long-term

incentive plan, or both.

UK Corporate Governance Code

When making decisions relating to

remuneration, the Committee continues

tobe mindful of the guidance in the UK

Corporate Governance Code around clarity,

simplicity, risk, predictability, proportionality

and alignment to culture. As detailed in

thisreport, the Committee takes various

steps to ensure that the approach to

remuneration is consistent with these

principles, although we will always use

discretion to deliver the right outcome

forthe business where we deem

thatappropriate.

The Committee will continue to monitor

market developments throughout 2023

andwill consider how any emerging trends

may affect Alfa. This will include working

closely with the Board to understand if and

how to evolve the role for ESG targets in our

executive incentives to drive our priorities

in this area. I will be happy to answer

anyquestions you may have at the

upcoming AGM.

Adrian Chamberlain

Chair of the Remuneration Committee

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

Remuneration at a glance

This table sets out a summary of how the remuneration policy will apply during 2023:

Y1 Y2 Y3 Y4 Y5 2023 change

Salary &

benefits

(£000)

Base salary for CEO

increased by 8%.

Base salary for CFO and

COO increased by 5%

Pension

Unchanged

Annual bonus

(Policy

max150%)

Bonus opportunity for

COO increased from 100%

to 125%

LTIP (Policy

max 150%)

Unchanged

Safeguards

(Malus &

clawback)

Unchanged

Shareholding

requirements

(% of salary)

Unchanged

Post-

employment

shareholding

(% of salary)

Unchanged

Post

employment Y1

Post

employment Y2

CEO

CFO

COO

£29

£302

£245

CEO

CFO

COO

Waived

CEO

CFO

COO

CEO

CFO

COO

2023 grant 150%

CEO

CFO

COO

CEO

CFO

COO

Two-year

holdingperiod

50% deferred inshares

for three years

CEO

CFO

COO

100%

200%

Waived

125%

2023 grant 100%

Strategic report

Corporate governance Financial statements Other information

Shareholders approved the new Remuneration Policy at the AGM on 10 May 2021 and it 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. No changes to the Policy are proposed for 2023.

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.

Fixed elements of remuneration for Executive Directors

Element of

remuneration

Purpose and

link to strategy Operation Maximum opportunity Performance

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.

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.

These may include:

• A change in role and/or

responsibilities;

• Performance and/or development in

the role of the Executive Director; and

• 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.

Personal performance

will be taken into

consideration when

determining any

salaryincreases.

Benefits To provide market-

competitive benefits

which drive 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.

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.

Remuneration Report continued

Directors’ Remuneration Policy (Approved in 2021)

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

100

Element of

remuneration

Purpose and

link to strategy Operation Maximum opportunity Performance

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.

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).

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.

There are no

performance

conditions.

Variable elements of remuneration for Executive Directors

Element of

remuneration

Purpose and

link to strategy Operation Maximum opportunity Performance

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).

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.

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).

101

Strategic report

Corporate governance Financial statements Other information

Remuneration Report continued

Directors’ Remuneration Policy (Approved in 2021) continued

Element of

remuneration

Purpose and

link to strategy Operation Maximum opportunity Performance

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.

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).

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.

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.

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.

Maximum value of £30,000 at the

time of grant, including any existing

awards under the CSOP.

Awards vest subject

topredetermined

performance

conditions assessed

over a minimum period

of three years.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

102

Element of

remuneration

Purpose and

link to strategy Operation Maximum opportunity Performance

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.

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.

The Committee may

apply conditions to

participation in

all-employee share

schemes, which will

apply to all employees.

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.

Executive Directors are required to

hold shares equivalent to 200% of

their salary in value. 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 one year, and 50% of

that level for the second year.

There are no

performance

conditions.

Non-Executive Director Remuneration

Element of

remuneration

Purpose and

link to strategy Operation Maximum opportunity Performance

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.

Details of the current fee 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.

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.

Variable elements of remuneration for Executive Directors

103

Strategic report

Corporate governance Financial statements Other information

Remuneration Report continued

Notes to the Policy Table

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, time of 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.

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;

• Where there is 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.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

104

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 2023. The charts are based on the

following assumptions:

Pay scenario Purpose and link to strategy

Maximum + 50%

share price growth

Assumes 100% payout under the annual bonus

Assumes 100% payout under the LTIP plus 50% share price growth

Maximum Assumes 100% payout under the annual bonus

Assumes 100% payout under the LTIP

On-target Assumes 50% payout under the annual bonus

Assumes 25% payout under the LTIP (aligned with threshold performance)

Minimum Fixed elements of remuneration only – base salary, benefits and pension

Andrew Denton, CEO (£000)

£29

Maximum

On-target

Minimum

100%

Duncan Magrath, CFO (£000)

£1,330

£1,113

£572

£319

Maximum +

50% share

price growth

Maximum

On-target

Minimum

49%

39%

13%

27%

32%

24%

29%

56%

100%

Matthew White, COO (£000)

£893

£778

£460

£258

Maximum +

50% share

price growth

Maximum

On-target

Minimum

39%

30%

13%

32%

37%

31%

29%

33%

56%

100%

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

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Notes to the Policy Table continued

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.

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.

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.

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.

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.

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.

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.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

106

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

ShareSave

(SAYE)

Scheme

Unvested options will lapse and

savings will be returned on

cessation of employment.

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.

Options can be exercised immediately, or up to six months ofsavings

canbe made before exercising options. The Committee may determine

that the options should be exercised 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 original release date. Ifthe

participant dies, options willnormally vest at the time of their death

onthe same basis asfor other good leavers. Vested options may be

exercised at anytime in the six months after the date of cessation,

afterwhichthey will lapse.

Other

payment

None. Possible disbursements

suchaslegal costs and

outplacement services.

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 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.

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.

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Annual Report on Remuneration 2022

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.

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.

The Alfa Remuneration Policy is aligned with longer-term shareholder interests and structured to

promote the Group’s financial and strategic priorities.

Simplicity

Remuneration structures should avoid complexity

and their rationale and operation should be easy

to understand.

Alfa’s approach to its remuneration framework focuses on simplicity. The framework comprises 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.

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.

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.

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.

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.

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.

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.

Alignment to culture

Incentive schemes should drive behaviours

consistent with Company purpose, values

andstrategy.

These should include consideration of performance metrics, governance requirements and

engagement withstakeholders.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

108

This section of the Directors’ Remuneration Report sets out the remuneration earned in 2022 and the proposed remuneration for 2023,

and will be subject to an advisory vote at the 2023 AGM. During the year, the Remuneration Policy operated as intended. The following

sections on pages 109 to 117 have been audited by RSM: Single figure remuneration, Long-Term Incentive Plan – awards vesting in the

year,Pension entitlements, Payments for loss of Office, Payments to past Directors and Statement of Directors’ Shareholdings and

Schemeinterests.

Single total figure of remuneration

The audited table below sets out the aggregate emoluments earned by the Directors of the Company during 1 January 2022 to 31

December 2022 and for comparison, the amounts earned during the period 1 January 2021 to 31 December 2021.

£’000s

Salary

andfees Benefits

Pension

Total fixed

remuneration

Annual

bonus

Long-term

incentives

Total variable

pay

Total figure

remuneration

Executive Directors

Andrew Page

2022 23 5 – 28 – – – 28

2021 345 12 – 357 – – – 357

Andrew Denton

2022 23 4 – 27 – – – 27

2021 297 13 – 310 – – – 310

Duncan Magrath 2022 275

13 16 304 265 1,147 1,412 1,716

2021 275 13 16 304 316 – 316 620

Matthew White 2022 220 14 13 247 171 459 630 877

2021 220 14 13 247 205 – 205 452

Non-Executive Directors

Chris Sullivan 2022 65 – – 65 – – – 65

2021 65 – – 65 – – – 65

Steve Breach 2022

65 – – 65 – – – 65

2021 65 – – 65 – – – 65

Adrian

Chamberlain

2022 65 – – 65 – – – 65

2021 65 – – 65 – – – 65

Charlotte

deMetz

2022 55 – – 55 – – – 55

2021 55 – – 55 – – – 55

1. From 2022 Andrew Page and Andrew Denton received reduced salaries, which were set at the legal minimum level.

2. Benefits for Executive Directors corresponds to the taxable value of benefits receivable during the relevant financial year and principally include company car

allowance (or cash equivalent), life assurance, travel insurance and private medical insurance.

3. Pension – Andrew Page and Andrew Denton have opted out of the pension scheme. Duncan Magrath and Matthew White receive a cash payment in lieu of a

pension contribution.

4. Annual bonus – corresponds to the amount earned in respect of the relevant financial year. For the CFO and COO, the values disclosed in the table above

include the gross value of the amount of bonus deferred into shares.

5. The LTIP figures are captured in the year that performance periods have ended (see page 112 for further details). 2022 figure: relates to 100% of the LTIP

awards granted on 3 June 2020 which will vest on 3 June 2023 following the achievement of the TSR and EPS targets for the three-year period ended

31December 2022. The value of these awards has been calculated using the three-month average share price to 31 December 2022 of 1.55p. No LTIPs were

eligible to vest in 2021 for Directors (those granted on 3 June 2020 being the first awards to be made to Executive Directors).

Context to remuneration decisions

The Committee’s decision-making this year has taken into account a range of internal and external factors including the Committee’s

responsibility for reviewing remuneration and related policies for employees throughout the Group. This ensures we take the reward,

incentives and conditions available to colleagues into account when considering the remuneration of Executive Directors and senior

management. The business acted in line with the section 172 governance guidelines while continuing to deliver exceptional results for

shareholders. In particular, the Committee was mindful that: (i) During the year the Board upgraded estimates to shareholders and the

continuing strong cash generation enabled the payment of two special dividends along with the regular dividend to shareholders; and (ii)

The business has continued to take appropriate actions to support our colleagues and neutralise the impact on business performance of

the effects of the macroeconomic climate and continued uncertainty surrounding the impact of, in particular, the rise of interest rates,

inflation and increasing energy costs.

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Annual Report on Remuneration 2022 continued

Base salary

The Committee determined that there would be no increase awarded to Duncan Magrath and Matthew White for the period from

1January 2022 to 31 December 2022. As noted in the 2021 Remuneration Report, the Chairman, Andrew Page and CEO, Andrew Denton

have elected to receive the legal minimum salary requirement, which will reflect the National Living Wage.

2022 annual bonus

The 2022 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. Duncan Magrath and Matthew

White both participated in the 2022 annual bonus (which combines a cash award and conditional deferred shares award). The Executive

Chairman and CEO have waived their entitlement to a bonus for the 2022 performance year.

In respect of the annual bonus, the targets were weighted towards financial metrics, with 75% of the award measured on the revenue and

operating profit of the Company. The outcome of this element of the bonus can be increased or decreased by a modifier based on the

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. The modifier cannot increase the bonus beyond the

Executive Director’s maximum bonus opportunity. The remaining 25% is subject to achievement of individual personal objectives.

Furtherdetails on performance outcomes for the non-financial measures are shown in the second table.

The following table sets out the targets, actual performance against these targets and accordingly, the applicable payout for

2022annualbonus:

2022 Annual Bonus Outcome

Performance

measure

Weighting

(based on

100% max)

Threshold

performance

50% Target

Performance

required

Maximum

performance

required

Actual

Performance

Annual Bonus

value for

threshold

and

maximum

performance

(% of max)

Percentage of

maximum

performance

achieved

Actual annual bonus

value achieved

(%ofsalary)

Duncan

Magrath

Matthew

White

Maximum opportunity (% salary) 125% 100%

Revenue (A) 37.5% £88m £93m £96.5m £93.3m 0% – 100% 54.4% 25.5% 20.4%

Operating Profit

(B)

37.5% £23m £25.5m £28m £29.6m 0% – 100% 100% 46.9% 37.5%

Total income

targets (C=A+B)

75% 72.4% 57.9%

Cash flow

conversion (D)

Modifier 75% 100% 125% 101% 0.75 – 1.25 1.02 1.02 1.02

TOTAL financial

(CxD)

59.1% 73.8% 59.1%

Personal

performance

25% 0% – 100% 22.5% 18.7%

TOTAL 100% 96.3% 77.8%

Total payable (£) £264,886 £171,177

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

110

Performance against non-financial measures

The personal measures described above are assessed with reference to the following objectives:

Objective Commentary on performance achieved Achievement

Duncan Magrath Finance structure Built resilience into the team, through use of systems and

crosstraining of people and migrated EMEA onto outsourced

payroll provider.

18.0%

Strategic Developed longer-term model for use in strategic scenario planning.

Management Information Enhanced forecasting systems and processes increasing reliability

and accuracy of forecasts, improving depth of understanding of

key drivers of business performance.

ESG Clear ESG framework embedded within the organisation

withprogress on setting ESG targets. Developed process

formeasuring Scope 3 emissions to enable setting of targets

toachieve net zero.

Matthew White People Hit targets for growing client facing team whilst achieving record

employee engagement scores.

18.7%

Software Successful delivery of software enhancements, including Version

5.7, and started to access software talent for development outside

London market with launch of Portugal smart hub.

Delivery Continued to successfully deliver implementations, whilst

increasing partner support, including in the US, and progressed

investigations of partner-led delivery.

ESG Clear ESG framework embedded within the organisation with

progress on setting ESG targets.

Strategic Change Delivery of initiatives to:

• Increase systems implementation capacity.

• Increase software development capacity.

• Simplify the implementation of our software.

• Improve our strategic process.

Performance against annual bonus targets

Based on the achievements listed above, the Committee agreed that the final vesting under the 2022 bonus would be 77.1% of the

maximum for Duncan Magrath and 77.8% 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. In accordance

with the Remuneration Policy, 50% of these bonus amounts will be paid in cash, with the remaining 50%, after deduction of tax, to be

deferred into an award of Alfa shares with a minimum holding period of three years.

Executive Base salary

Maximum

opportunity

(% salary)

Performance

outcome

(% of

maximum

Bonus outcome

Duncan Magrath £275,000 125% 77.1% 264,886

Matthew White £220,000 100% 77.8% 171,177

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Annual Report on Remuneration 2022 continued

Long-Term Incentive Plan – awards vesting in the year

Awards granted to Executive Directors in June 2020 were subject to EPS growth and relative TSR performance over a three-year period

ended 31 December 2022.

The EPS targets (applying to 50% of each award) required EPS for the year ending 31 December 2022 of 2.3p for 25% of that element to

vest, rising to full vesting if EPS for the year ending 31 December 2022 was 2.8p or higher. The Group’s 2022 EPS outturn of 8.09p warrants

100% vesting of this element of the award.

The TSR element (applying to 50% of each award) required the Group’s three-year TSR performance to rank at median against the

constituents of the FTSE Small Cap index (excluding investment trusts and the Company) for 25% of that element to vest, rising to full

vesting if Alfa’s TSR ranked at or above the upper quartile against the comparator group. Alfa’s TSR over the period was 106%, which was

atthe 95th percentile versus the comparator group. This outcome warrants 100% vesting of this element of the award.

This combined performance resulted in full vesting of the 2020 awards. The Committee determined, after careful consideration of

business performance and the interests of Alfa’s stakeholders such as shareholders, customers, and employees, that the formulaic

outcome was appropriate. Consequently, 100% of the total award will vest.

Awards are scheduled to vest on 3 June 2023, and both Executive Directors will be subject to a two-year holding period and released on

3June 2025. Details of the awards to Executive Directors are set out in the table below:

No. of

granted

Proportion of

award vesting

(%maximum)

No. of

vesting

Value attributable

to share price

growth

Face value

of shares

vesting

Duncan Magrath 740,242 100% 740,242 £599,596 £1,147,375

Matthew White 296,097 100% 296,097 £239,839 £459,950

1. The value of the award which is attributable to share price growth. Based on the share price at grant of 0.74p.

2. The amounts shown are indicative vesting values based on the average share price for the three-month period to 31 December 2022 of £1.55.

Long-Term Incentive Plan – awards granted in the year

Share awards were made to the Executive Directors under the LTIP on 12 April 2022 equivalent to 150% of salary for the CFO and 100% of

salary for the COO. The Executive Chairman and CEO have waived their entitlement to participate in the 2022 LTIP.

Executive Date of award

Face value (% of

salary)

Number of

shares granted

Average share

price at grant (£) Award value

Threshold of

vesting (% of

face value)

Performance

period

Duncan Magrath 12 April 2022 150% 250,151 1.649 £412,500 25% 1 January 2022

31 December

2024

Matthew White 12 April 2022 100% 133,414 1.649 £220,000 25% 1 January 2022

31 December

2024

1. The share price used to calculate the number of performance shares was £1.649, the average five-day share price preceding the date of the award

(12April2022). This represents the face value of the share awards.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

112

The LTIP awards are subject to two equally weighted performance metrics:

Measure Description Weighting Threshold/target Maximum target

2022

Total shareholder return

(TSR)

Measured with reference to the FTSE Small Cap index

excluding investment trusts and theCompany

50% Median Upper quartile

Earnings per share (EPS) Measured with reference to EPS performance intheyear

ending 31December 2024

50% 7.4p 9.2p

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 begins on 1 January of the year the awards are granted and will end

on31December of the third year. 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.

Pension entitlement

The only element of remuneration that is pensionable is basic annual salary. A cash payment in lieu of pension contributions are 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

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 2022 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

There were no payments for loss of office during the year or prior year.

Payments to past Directors

There were no payments to past Directors for loss of office during the year or prior year.

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 Basic fee Audit and Risk Chair Remuneration Chair Senior Independent Director

Steve Breach 55 10 – –

Adrian Chamberlain 55 – 10 –

Charlotte de Metz 55 – – –

Chris Sullivan – – – 65

There is no additional fee payable to the Chair of the Nomination Committee.

113

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Remuneration Report continued

Annual Report on Remuneration 2022 continued

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 2020 and 2022 compared 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 in 2020 in line with the requirements under the EU Shareholder Rights

Directive II and over time a five-year comparison will be built up. Alfa Financial Software Holdings PLC employs only the 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

2022

% change

in salary/

fees

2022

% change

in benefits

2022

% change

in annual

bonus

2021

% change in

salary/fees

2021

% change in

benefits

2021

% change in

annual

bonus

2020

% change in

salary/fees

2020

% change in

benefits

2020

% change in

annual

bonus

Andrew Page (Chairman) (93)% (58)% n/a (8)% (8)% n/a 0% (7)% n/a

Andrew Denton (CEO) (92)% (69)% n/a (8)% (12)% n/a 0% (6)% n/a

Duncan Magrath (CFO) 0% 0% (16)% 0% 43% 12% n/a n/a n/a

Matthew White (COO) 0% 0% (17)% 0% 40% 16% 0% n/a n/a

Steve Breach (NED) 0% n/a n/a 0% n/a n/a 0% n/a n/a

Adrian Chamberlain (NED) 0% n/a n/a 0% n/a n/a n/a n/a n/a

Charlotte de Metz (NED) 0% n/a n/a 0% n/a n/a n/a n/a n/a

Chris Sullivan (NED) 0% n/a n/a 0% n/a n/a 0% n/a n/a

Employees 9% 8% n/a 5% 7% n/a 9% 13% (1)%

1. Duncan Magrath joined the Board in March 2020, the first year he received a bonus was in April 2021, in relation to the 2020 financial year.

2. Matthew White joined the Board in October 2019, the first year he received a bonus was in April 2021, in relation to the 2020 financial year.

3. Duncan Magrath, Adrian Chamberlain and Charlotte de Metz joined Alfa part way through 2020. In calculating the increase in salaries, the figures for 2020

have been adjusted as though they started on the 1 January of that year.

Director contracts

£0

£25

£50

£75

£100

£125

£150

£175

Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22

Value (£) (rebased)

Total Shareholder Return (for the period from 25 May 2017 to 31 December 2022)

Alfa Financial Software Holdings PLC FTSE Small Capitalisation Index Ex Investment Trusts

May-17

Details of the Executive Directors’ service contracts and the Non-Executive Directors’ letters of appointment are set out below. All

Directors’ service contracts and letters of appointment are available for inspection at the Company’s registered office and at the AGM up

until the start of the meeting.

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 4 May 2017

Chris Sullivan 18 July 2019

Matthew White 9 October 2019

Executive Directors‘ contracts operate on a 6 or 12-month rolling notice basis. Non-Executive Directors’ contracts are for fixed periods of

three years, which may be renewed for up to a maximum of nine years in total.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

114

Total shareholder return (for the period from 25 May 2017 to 31 December 2022)

The graphs below shows Alfa’s TSR performance from Admission in May 2017 to 31 December 2022 against the TSR performance of

theFTSE small cap index (excluding investment trusts). The second graph shows the rebased TSR performance from 1 January 2020 to

31December 2022. The graphs 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 index, the Committee considers that it is

the appropriate index for comparative purposes. These graphs have been calculated in accordance with the Directors’ Remuneration

Reporting Regulations and shows total shareholder return from the date of listing to 31 December 2022.

Value (£)

May-17

Alfa Financial Software Holdings PLC

Dec-18 Dec-19 Dec-20 Dec-21 Dec-22

FTSE Small Capitalisation Index Ex Investment Trusts

105

140

175

TSR for the period 1 January 2020 to 31 December 2022

Value (£) (rebased)

Alfa rebased

Dec-19 Dec-20 Dec-21 Dec-22

Small Cap rebased

100

150

200

Total CEO single figure of remuneration and variable pay outcome

The table below shows the CEO single figure of total remuneration during financial years from 2017 to 2022.

CEO single figure of

remuneration

Annual bonus pay-out (as a %

ofmaximum opportunity

LTIP vesting (as a % of

maximum opportunity)

2022 £26,998 n/a n/a

2021 £310,236 n/a n/a

2020 £337,174 n/a n/a

2019 £338,129 n/a n/a

2018 £337,944 n/a n/a

2017 £349,478 n/a n/a

1. The CEO waived any eligibility for a bonus from 2017 to 2022.

2. The CEO waived any eligibility to participate in the long-term incentive awards in respect of the 2017 to 2022 performance years.

3. The CEO agreed to a reduction in salary effective 1 December 2021.

115

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Annual Report on Remuneration 2022 continued

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 2022 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

annual salary reviews and annual reviews of benefits packages. Salary awards are made with reference to the outputs of annual industry

benchmarking exercises. As per guidance, data relating to employees who left part way through the year and/or employees on

secondment were excluded from the data set and analysis. Information calculated as at 31 December 2022.

Pay ratio table

Year Method

25th percentile

(lower quartile)

50th

percentile

(median)

75th percentile

(upper quartile)

2022 A 0.6:1 0.4:1 0.3:1

2021 A 6.1:1 4.0:1 3.2:1

2020 A 5.7:1 4.3:1 3.2:1

2019 A 5.7:1 4.4:1 3.2:1

Year £’000s

25th

percentile

50th

percentile

75th

percentile

2022 Total remuneration 51.4 78.2 108.4

Salary only 47.2 70.0 91.5

2021 Total remuneration 50.9 77.1 96.7

Salary only 46.8 72.2 86.2

2020 Total remuneration 59.5 78.5 106.7

Salary only 55.1 73.2 98.1

2019 Total remuneration 59.0 76.2 106.3

Salary 57.1 71.2 95.7

This is the fourth 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 significant decrease in the pay ratio,

dueto the fact that the CEO agreed to reduce salary to the minimum level in December 2021. As a result, the CEO’s STFR is lower than

inprevious years.

Notes:

1. The CEO advised the Committee that due to his holding in CHP Software and Consulting Ltd, the main significant shareholder in theCompany, he elected to

reduce his salary to the minimum statutory level of remuneration with effect from 1 December 2021. Thisresulted in the CEO’s SFTR being lower than in

previous years.

2. The CEO has waived his right to any bonuses or LTIPs, the value of any employee equivalents have been excluded from the employee remuneration

figuresused.

3. Total remuneration includes benefits receivable during the relevant financial year and principally include company car (or cash equivalent), life assurance,

travel insurance and private medical insurance.

4. A number of new joiners to the Company in 2021 fell into the lower quartile bracket, thus lowering the lower quartile median figure.

5. A number of senior members of staff (who would typically fall into the upper quartile bracket) left part way through the year and were therefore excluded

from the data set and analysis. This is reflected in the decrease to the upper quartile (median) remuneration figure in 2021.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

116

Statement of Directors’ shareholdings and scheme interests

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 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. There are no share ownership requirements for the Non-Executive Directors.

Shareholding requirements and the number of shares held by Directors during the year and as at 31 December 2022 are set out in the

table below:

Shares owned

outright at

31 December

2021

ShareSave

without

conditions

Interests in share

incentive schemes

which are

performance-

tested but

unvested

Interests in share

incentive schemes

with performance

conditions

Shares owned

outright at

31 December

2022

Shareholding

requirement

(% of

requirement

achieved)

Andrew Page 182,334,041 – – – 177,272,843 achieved

Andrew Denton 15,322,107 – – – 14,643,305 achieved

Matthew White 861,866 11,718 296,097 293,530 892,729 achieved

Duncan Magrath 182,165 11,718 740,242 550,369 230,668 70%

Chris Sullivan – – – – 159,649 n/a

Steve Breach 43,983 – – – 43,983 n/a

Adrian Chamberlain 14,380 – – – 14,380 n/a

Charlotte de Metz – – – – – n/a

1. Calculated using the share price of £1.66 (as at 31 December 2022).

2. Duncan Magrath and Matthew White elected to join the Company ShareSave share scheme for which an option to acquire 11,718 ordinary shares at an

option exercise price of £1.536 per ordinary share was granted on 30 November 2021. Subject to certain conditions being satisfied, the entitlement to

exercise the ShareSave option arises during the period 1 January 2025 to 30 June 2025.

3. No LTIPs vested 2022. However, as described earlier in this report, 2020 LTIP awards (which vest based on performance to 31 December 2022) will vest

infullon the third anniversary of grant in June 2023. 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, shares held by the employee benefit trust, 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 2022 no new shares or reissue of

treasury shares had been used to satisfy awards, and so this limit had not been exceeded.

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 in the People section on pages 58 to 61. 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 a 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.

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Annual Report on Remuneration 2022 continued

All-employee share plans

The Company proposes to issue a new ShareSave Scheme each year and all Executive Directors will be entitled to participate on the same

basis as all other employees.

Relative importance of spend on pay

The following table illustrates Alfa’s revenue, operating profit and returns to shareholders by way of dividends and share buybacks in

relation to spend on pay for all employees for the period and last financial year.

2022 2021 Change

Total personnel costs (£m) (note 7 to the consolidated financial statements) 47.1 42.4 11%

Average number of employees (note 7 to the consolidated financial statements) 420 383 10%

Revenue (£m) (consolidated income statement on page 135) 93.3 83.2 12%

Operating profit (£m) (see note 4.2 to the consolidated financial statements) 29.6 24.7 20%

Returns to shareholders (£m) (see note 31 for total dividends and value of shares

purchased during the year taken from consolidated statement of changes in equity on

page 137. 28.1 32.7 (17%)

Implementation of the Remuneration Policy 2023

2023 Executive Directors’ base salary

The Executive Directors’ salaries were reviewed in 2022. As noted in the 2021 Remuneration Report, the Chairman, Andrew Page and CEO,

Andrew Denton indicated that they will continue to receive the legal minimum salary requirement, as they are significant shareholders

inthe Company and want to align their future remuneration with those of the other shareholders. The base salary of the Chairman and

CEO will increase by 8% as at 1 January 2023 to remain in line with the minimum national living wage.

The Committee carried out a review of the CFO‘s and COO’s remuneration packages in late 2022 and determined that there would be a

base salary increase of 5%, this is the first pay rise since they joined the Board in 2020 and 2019 respectively. This is lower than the 2022

average employee salary increase of 8.74%. The table below shows the salaries fortheExecutive Directors as at 1 January 2023 in

comparison to base salary at 1 January 2022:

£ 1 January 2023 1 January 2022 % change

Andrew Page 24,860 23,000 8%

Andrew Denton 24,860 23,000 8%

Duncan Magrath 288,750 275,000 5%

Matthew White 231,000 220,000 5%

2023 annual bonus

The Chairman and CEO have elected to waive their bonus opportunity. The CFO will be entitled to a maximum annual bonus of 125% of

salary, with the COO entitled to an increased annual bonus opportunity equal to 125% of salary from 2023. The following measures have

been selected for the 2023 annual bonus performance year:

Measure Weighting

Operating profit 37.5%

Revenue 37.5%

Operating free cash flow conversion Modifier

Personal performance 20%

ESG 5%

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

118

The Committee determined that the existing Bonus measures of revenue, operating profit and personal objectives continue to be

appropriate for the business. However, in light of the evolving ESG landscape and following an extensive review process, the Committee

approved the introduction of an ESG measure. The ESG measure would consist of two individual measures, one assessing overall

employee retention and the other overall employee engagement, these will have a combined weighting of 5% of total bonus opportunity.

Each bonus measure has a target. Failure to meet a minimum percentage of the revenue and operating profit target will result in no bonus

being awarded for that element. Achieving a stretch of operating profit and revenue target will result in the maximum bonus being awarded

under the formula (subject to the minimum operating profit target being achieved). The operating profit and revenue bonus elements can be

decreased by the operating free cash flow conversion modifier, if cash performance falls below target. 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

2023 Directors’ Remuneration Report. In accordance with the Policy, 50% of any bonus earned will be deferred into shares for a three-year

holding period.

2023 Long-Term Incentive Plan

The award opportunity will remain at 150% of salary for the CFO and 100% of salary for the COO. 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. For 2023, the Executive

Chairman and CEO have elected to waive their LTIP opportunity. The maximum LTIP opportunity under the Policy is 150% of salary.

The Committee has agreed TSR and EPS measures for the LTIP, with an equal weighting applied to each measure.

The comparator group for the TSR is the constituents of the FTSE Small Cap index, 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. In each case

threshold vesting will be 25% of the maximum. Straight-line vesting occurs between threshold and maximum for both TSR and EPS

elements of the award.

Measure Description Weighting Threshold/target Maximum target

2023

Total shareholder return

(TSR)

Measured with reference to the FTSE Small Cap

index excluding investment trusts and the

Company 50% Median Upper quartile

Earnings per share (EPS)

Measured with reference to EPS performance in

the year ending 31 December 2025 50% 9.4p 11.4p

Pension and benefits

For 2023 the CFO and COO, in lieu of a pension contribution, will receive a cash allowance of 6% of salary in line with the pension

contribution available to the wider workforce. No changes are proposed to the benefits provided.

2023 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 2023 fees. It was determined that the fees will remain at the following level:

Base fee £55,000

Additional fee for chairing Audit & Risk Committee or Remuneration Committee (subject to maximum fees of £65,000) £10,000

Fee for the Senior Independent Director (including chairing Committees) £65,000

119

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Corporate governance Financial statements Other information

Remuneration Committee membership

All current members of the Committee are deemed to be independent. Accordingly, the Committee continues to comply with the

independence requirements set out in the Code.

During 2022, there were two formal meetings of the Remuneration Committee, all of which achieved full attendance by the

Committeemembers.

The responsibilities of the Committee are set out in the corporate governance section of the Annual Report on page 77. TheExecutive

Directors and the CPO may be invited to attend meetings to assist the Committee in its deliberations, as appropriate. Noperson is present

during any discussion relating to their own remuneration or is involved in deciding their own remuneration.

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 share schemes. The Company have continued to retain the services of Ellason LLP as external advisors

to the Committee for executive remuneration advice and updates on market trends. The Committee also retained Tapestry Global

Compliance LLP (Tapestry) who continue to act as external advisors to the Committee, to provide support and information on our

all-employee share schemes. Both advisor firms were selected on their expertise and quality of their previous advice and originally

appointed by the Committee. Ellason LLP’s fees for 2022 amounted to £23,790 (2021: £14,688); Tapestry fees were £978 (2021: £37,906).

Neither Ellason nor Tapestry provide any other services to the Group or any of the Directors and the Committee is satisfied that both firms

remain independent. Ellason is a member and signatory to the Remuneration Consultants Group’s Code of Conduct, which requires that

their advice be objective and impartial. Neither adviser has any other connection with the Company or its Executive Directors.

Statement of shareholding voting

The 2021 Directors’ Remuneration Report was approved by shareholders at the 2022 AGM. The Director’s Remuneration Policy was

approved by shareholders at the 2021 AGM. The votes cast were as follows:

£’000s For Against Votes withheld

Directors’ Remuneration Report (FY2021) 99.98% 0.02% 0

Directors’ Remuneration Policy 98.50% 1.50% 0

As ever, the Committee welcomes any enquiries or feedback shareholders may have on the Policy or any aspect of the work

oftheCommittee.

Adrian Chamberlain

Chair, Remuneration Committee

1 March 2023

Remuneration Report continued

Annual Report on Remuneration 2022 continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

120

Directors’ report

The Directors of Alfa present their report and the audited financial statements for the year

ended 31 December 2022. 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 in the tables below. As permitted by the Companies

Act2006, the Directors’ report includes the disclosures in the Strategic Report on:

Location in annual report

(page)

Performance and future development in the business 1 to 69

Important events affecting the Group since the financial year 173

Climate change emission reporting 64 to 67

Long-term Viability statement 46 to 47

Stakeholder engagement 52 to 53

Employee engagement 52

Directors who held office during the year 114

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 (page)

Details of any long-term incentive schemes 170 to 171

Details of waiver of Director emoluments

and future emoluments 110 and 112

Shareholder waiver of dividends and

futuredividends 122

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’

Corporate governance statement

The Company’s statement on corporate governance can be found on page 73 of the

Corporate governance report. The report forms part of this Directors’ report and is

incorporated by cross reference.

2023 Annual General Meeting

The Company’s Annual General Meeting will be held at 3pm on Wednesday, 26 April 2023

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 2023 AGM, together with explanatory

notes, will be sent to shareholders as a separate document and made available on the

Company’s website www.alfasystems.com/en-eu/investors/shareholder-information.

Amendment of the Articles

The Articles may only be amended by aspecial resolution of the Company’s shareholders in

a general meeting.

Principal activities

The principal activity of the Alfa Group is the

provision of software and software-related

services to the auto and equipment 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.

Directors’ interests

The Directors’ interests in and options over

ordinary shares in the Company are shown

in the Directors’ Remuneration Report on

page 117. There has been no change in the

CHP shareholding since the end of the

financial year and to the date of this report,

however there has been a change to the

percentage interest held by Andrew Page

and Andrew Denton in CHP and hence their

interests in Alfa. As at 1 March 2023 being

the latest practicable date of this report,

Andrew Page holds 177,627,869 shares

(2022: 177,272,843) an increase of 355,025

shares and Andrew Denton holds 14,277,780

shares (2022: 14,643,305) a decrease of

355,025 shares.

In line with the requirements of the

Companies Act, each Director has notified

the Company of any situation in which they

have, 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.

121

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Directors’ report continued

Research and development

The Group continued to invest in product

research and development throughout the

year. The product is enhanced by both

specific customer driven requirements,

some of which are paid for by customers,

but also by internal development using the

skills and knowledge from the development

teams but also using feedback from the

implementation teams. The amount

expensed in the profit and loss account

forresearch and development is shown

innote 6 to the consolidated financial

statements. In addition, amounts are

capitalised as Other intangible assets which

are shown in note 15 to the consolidated

financial statements.

Directors’ insurance and

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.

Financial risk management

The financial risk management objectives

and policies of the Group and the Company

and the exposure of the Group and the

Company to price risk, credit risk, liquidity

risk and cash flow risk are disclosed in note

3 to the financial statements.

Internal Controls

Further details of our internal control

framework can be found in the Audit

andRisk Committee Report on page 94.

Interest capitalised in

theperiod

No interest has been capitalised by Alfa in

the year ended 31 December 2022 or at

31December 2021.

Profits and dividends

The consolidated profit after tax for the

year ended 31 December 2022 was £24.5m

(FY21: £19.2m). The results are discussed

ingreater detail in the Financial review

onpages 34 to 37. Information on dividends

is shown in note 31 of the financial

statements and is incorporated into this

report by reference. Subject to approval at

the Annual General Meeting on 26 April

2023, a 2022 final dividend of 1.2 pence per

share will be paid on 26 June 2023 to

holders on the register on 26 May 2023.

The ordinary shares will be quoted

ex-dividend on 25 May 2023. In addition,

the Board has decided to declare a special

dividend of 1.5 pence per share, with an

ex-dividend date of 13 April 2023, a record

date of 14 April 2023 and a payment date of

9 May 2023. This follows the payment of

two special dividends of 3.0 pence and 3.5

pence on 16 June 2022 and 7 October 2022

respectively.

Shares held in the Employee

Benefit Trust

During the year, the trustees of the

employee benefit trust which operates in

connection with the Company’s share plans

waived its rights to receive dividends on any

shares held by it. Details of the trust can be

found in note 28 of the financial statements.

Share buyback programme

On 18 January 2022, the Company

announced the commencement of a share

buyback programme to acquire shares with

an aggregate purchase price of up to £18m.

The purpose of the share buyback is to

reduce the Company’s share capital and to

enable the Company to meet obligations

arising from share option programmes.

During the year the Company bought back

through market purchases onthe London

Stock Exchange 2,832,073 ordinary shares

of 0.1pence each, representing 0.95% of

the issuedsharecapital of the Company as at

31December 2022, for a total consideration

of approximately £4.65m, including

expensesof£12.5k.

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 2022 was made up of

300,000,000 ordinary shares of 0.1p each,

of which it held 2,832,073 shares in

Treasury. Further information regarding

theCompany’s issued share capital can

befound in note 26 of the Company

financial statements on page 169.

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.

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.

When considering recruitment, training,

career development, promotion or any

other aspect of employment, we strive to

ensure that no colleague or job applicant

isdiscriminated against, either directly or

indirectly, on the grounds of disability.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

122

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 2022 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 (29,947,480

ordinary shares). This authority

isrenewable annually, and a special

resolution will be proposed at the 2023

AGM to request shareholders to renew it.

On 18 January 2022, the Company announced

that it had entered into an arrangement

withBarclays Bank PLC, acting through its

investment bank to purchase ordinary shares

in the Company up to an aggregate purchase

price of £18m over an 18-month period. The

purchase of the ordinary shares is made

independently anduninfluenced by the

Company and heldas treasury shares.

As at 27 February 2023, being the last

practicable date prior to the production of

this Annual Report, the number of ordinary

shares held in treasury was 3,406,459.

Accordingly, total voting rights amounted

to296,593,54 ordinary shares as at the

same date.

Transactions with

relatedparties

On 1 August 2022 the Group reached an

agreement for the assignment of its lease to

the 9th floor of Moor Place, 1 Fore Street

Avenue, London to CHP Software and

Consulting Limited. There was no

consideration for the transaction, with CHP

taking on all the rights and liabilities for the

9th floor from Alfa. The assignment of the

lease resulted in the de-recognition of the

right to use asset and lease liability, which

resulted in a one-off gain of £0.5m which

was fully recognised in the year.

There is an existing material transaction

which the Company has entered into with

related parties:

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 Listing Rules,

including Listing Rule 9.5.1R, and Listing

Rules 6.5.4R.

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Company 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 32.3

to the consolidated financial statements.

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 that takes effect, alters or

terminates 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.

Appointment and retirement

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 this report

on page 82.

All Directors will stand for re-election at the

AGM on an annual basis, in line with the

recommendations of the 2018 Code.

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. The Directors have the

authority to allot shares or grant rights to

subscribe for or to convert any security into

shares in the Company. Further details of

the proposed authorities are set out in the

notice of the AGM. A share repurchase

programme commenced on 18 January

2022. Further details can be found

page122.

123

Strategic report

Corporate governance Financial statements Other information

Streamlined Energy and

Carbon Reporting (SECR)

A breakdown of our greenhouse gas (GHG)

emissions in accordance with our regulatory

obligation to report greenhouse gas

emissions pursuant to section 7 of the

Companies Act 2006 (Strategic Report

andDirectors’ report) Regulations 2013

andthe Companies (Directors’ report),

canbe found on page 67.

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 53.

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

success. We continue to keep them informed

on matters affecting them through CEO

updates and both formal and informal

meetings and through Confluence, our

intranet. Our employees are regularly

consulted on a wide range of matters affecting

their current and future interests. Many of our

employees have interests in shares in the

Company. Information on employee

engagement is available on page 52, with

additional information highlighted on pages 58

to 61. Further information on employee

engagement, as measured by our internal

employee surveys, is included on page 32.

Subsidiaries and branches

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 32.2 to

the accounts on page 173.

Disclosure 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

&Risk Committee and in accordance with

section 489 of the Companies Act of 2006,

a resolution to reappoint it will be put to the

2023 AGM.

Board approval of the

Directors’ report

The Directors’ report was approved by the

Board on 1 March 2023 and signed on its

behalf by:

Andrew Denton

Chief Executive Officer

1 March 2023

Political donations

The Group made no political donations and incurred no political expenditure during the year (FY21: £nil). It remains the Company’s policy

notto make political donations or to incur political expenditure. At the 2022 AGM, the Directors were generally and unconditionally

authorised by the Company’s shareholders to make limited political donations of 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.

Significant shareholdings at 31 December 2022 and 17 February 2023 (being the latest

practicable date of this report)

At the relevant dates, the Company had been notified, in accordance with chapter 5 of the Disclosure Guidance and Transparency Rules, of

the following voting rights as a shareholder of the Company:

Name of shareholder

No. of ordinary

shares at

31 December

2022

% of total voting

rights at

31 December

2022

No. of ordinary

shares at

17 February

2023

% of total voting

rights at

17 February

2023

Nature of

holding

CHP Software and Consulting Limited 191,905,649 64.58 191,905,649 64.67 Direct

BlackRock Investment Mgt 13,539,118 4.56 13,373,240 4.51 Indirect

NFU Mutual Investment Mgrs 11,527,597 3.88 11,492,597 3.87 Indirect

Aberdeen Investments (Standard Life) 11,482,195 3.86 11,478,966 3.87 Indirect

Invesco 10,356,742 3.49 10,392,467 3.50 Indirect

Directors’ report continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

124

Statement of Directors’

responsibilities

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

and are required under the Listing Rules of

the Financial Conduct Authority to prepare

group financial statements in accordance

with UK-adopted International Accounting

Standards. 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 UK-adopted

International Accounting Standards 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 UK-adopted

International Accounting Standards;

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; and

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. 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 75

to76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 1 March 2023

and is signed on its behalf by:

Andrew Denton

Chief Executive Officer

1 March 2023

125

Strategic report

Corporate governance Financial statements Other information

Financial

statements

Financial statements

127 Independent auditor’s report

135 Consolidatedstatementofprofit

orlossandcomprehensiveincome

136 Consolidated statement

offinancialposition

137 Consolidated statement

ofchangesinequity

138 Consolidatedstatementofcashflows

139 Notestotheconsolidated

financialstatements

175 Companystatementoffinancialposition

176 Companystatementofchangesinequity

177 Companynotestothe

financialstatements

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

126

Independent auditor’s report to the members

of Alfa Financial Software Holdings plc

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 2022 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

UK-adopted International Accounting Standards. 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 including Financial Reporting Standard 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 2022

and of the group’s profit for the year then ended;

• the group financial statements have beenproperly prepared in accordance with UK-adopted International Accounting Standards;

• 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.

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.

Summary of our

auditapproach

Commentary

Key audit matters Group

• Revenue recognition – software and services revenue from implementation projects

Parent Company

None

Materiality Group

• Overall materiality: £1.44m (2021: £1.14m)

• Performance materiality: £1.08m (2021: £0.86m)

Parent Company

• Overall materiality: £1.41m (2021: £1.12m)

• Performance materiality: £1.06m (2021: £0.85m)

Scope Our audit procedures covered 100% of revenue, total assets and profit before tax.

127

Strategic report

Corporate governance Financial statements Other information

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and parent

company 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 – software and services revenue from implementation projects

Key audit matter

description

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 and 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 for software and services revenue for implementation projects 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 degree of estimation involved in determining some inputs for inclusion in software/services

implementation revenue calculations;

• The potential risk of fraud in revenue recognition;

• The allocation of audit resources and effort.

Further details on revenue recognition are included in the financial statements in note 1.5 “Accounting

policies – Revenue recognition”, note 2 “Critical accounting judgements, estimates and assumptions”

and note 5 “Revenue from contracts with customers”.

Independent auditor’s report to the members

ofAlfaFinancial Software Holdings plc continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

128

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 (software and services) 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 and across projects. This included testing inputs in the calculations to supporting evidence;

• 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 analysis of the sensitivity of the calculations

to these estimates;

• Assessed specific contract key judgements including management’s treatment of any contract

modifications and whether these were recognised appropriately in line with IFRS 15;

• Auditing the disclosures in the financial statements and evaluating whether the policy for revenue

recognition is appropriately explained and critical judgements and key sources of estimation

uncertainty are appropriately disclosed.

Key observations

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.

No key audit matters were identified in respect of the Parent Company.

129

Strategic report

Corporate governance Financial statements Other information

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:

Group Parent company

Overall materiality

£1.44m (2021: £1.14m) £1.41m (2021: £1.12m)

Basis for determining

overallmateriality

5% of profit before tax (2021: 5% of profit

before tax)

1% of net assets, capped at 99% of group

overall materiality (2021: 1% of net assets,

capped at 99% of group overall materiality)

Rationale for benchmark applied

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

£1.08m (2021: £0.86m) £1.06m (2021: £0.85m)

Basis for determining

performance materiality

75% of overall materiality 75% of overall materiality

Reporting of misstatements

totheAudit Committee

Misstatements in excess of £0.07m

andmisstatements below that threshold

that, inour view, warranted reporting on

qualitative grounds.

Misstatements in excess of £0.07m

andmisstatements below that threshold

that, in our view, warranted reporting on

qualitative grounds.

An overview of the scope of our audit

The group has operations located in the following countries:

• United Kingdom

• United States of America

• Germany

• Australia

• New Zealand

Although the structure of the group is made up of a number of legal entities, we have assessed that the group is a single component for

the purposes of our audit because financial information is presented to management and the Board on a consolidated basis, the group’s

financial statements report a single segment and do not disclose any specific divisional information and the group’s principal activity is

consistent across all locations.

Our audit approach covers 100% of profit before tax, revenue and total assets. All audit work was completed by the group audit team and

no component auditors were used in our audit.

Independent auditor’s report to the members

ofAlfaFinancial Software Holdings plc continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

130

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:

• Checking the arithmetic accuracy of the forecasts that form the basis of the directors’ going concern assessment and

Viabilitystatement;

• Corroborating the cash balance that is used as the starting point for the forecasts by confirming to bank confirmations;

• Challenging management’s forecasts and comparing the 2023 budget to YTD results and order book;

• Assessing the assumptions made in management’s stress-testing;

• Completing further sensitivity analysis and stress-testing;

• Auditing the disclosures in the financial statements in respect of going concern and viability.

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.

In relation to the entity reporting on how they have applied the UK Corporate Governance Code, 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.

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 annal 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

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

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Corporate governance Financial statements Other information

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.

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.

Corporate governance statement

We have reviewed 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 Code specified for our review by the

Listing Rules.

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 and 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 set out on page 37;

• Directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the period is

appropriate set out on pages 46 to 47;

• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its

liabilities set out on pages 46 to 47;

• Directors’ statement on fair, balanced and understandable set out on page 94;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 41 to 45;

• Section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page

94; and,

• Section describing the work of the audit committee set out on pages 90 to 96.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement on page 125 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.

Independent auditor’s report to the members

ofAlfaFinancial Software Holdings plc continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

132

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. 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;

• 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.

The most significant laws and regulations were determined as follows:

Legislation/Regulation Additional audit procedures performed by the Group audit engagement team included:

UK-adopted IAS, FRS 102

andCompanies Act 2006

• Review of the financial statement disclosures and testing to supporting documentation;

• Completion of disclosure checklists to identify areas of non-compliance.

Tax compliance regulations • Inspection of advice received from internal / external tax advisors;

• Consultation with a tax specialist regarding the approach taken to the audit of tax;

• Consideration of whether any matter identified during the audit required reporting to an appropriate

authority outside the entity.

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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 The audit procedures performed in relation to revenue recognition are documented in the key audit

matter section of our audit report.

Capitalisation of

development costs

• Reviewing the Investment Committee meeting minutes for any projects which may indicate the

understatement of amounts capitalised during the period;

• Interviewing relevant personnel to understand the projects capitalised in the period and the nature

of projects not capitalised;

• Verifying the amounts capitalised during the year by reference to underlying payroll records and

timesheet data.

Management override of

controls

• 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.

Valuation of accruals, other

payables and provisions

• Testing a sample of accruals, other payables and provisions and verifying these to purchase invoices

and other supporting evidence;

• Challenging management to provide supporting evidence and justification for balances they have

accrued or provided for.

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

Following the recommendation of the audit committee, we were appointed by management in July 2020 to audit the financial statements

for the year ending 31 December 2020 and subsequent financial periods.

The period of total uninterrupted consecutive appointments is 3 years, covering the years ending 31 December 2020 to 31 December 2022.

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 in accordance with ISAs (UK).

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.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial statements

will form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism

of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over

whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.

Graham Ricketts

(Senior Statutory Auditor)

For and on behalf of RSM UK Audit LLP, Statutory Auditor

Chartered Accountants

25 Farringdon Street, London, United Kingdom, EC4A 4AB

1 March 2023

Independent auditor’s report to the members

ofAlfaFinancial Software Holdings plc continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

134

£m Note 2022 2021

Continuing operations

Revenue 5 93.3 83.2

Cost of sales (3 3.4) (29. 0)

Gross profit 59.9 54.2

Sales, general and administrative expenses (31. 0) (30 .0)

Other income 0.7 0.5

Operating profit 6 29.6 24.7

Share of net loss of joint venture 19 (0 .1) (0 .1)

Profit before net finance costs and tax 29.5 24.6

Finance income 10 – –

Finance expense 10 (0.6) (0. 8)

Profit before taxation 28.9 23.8

Taxation 11 (4 . 4) (4 . 6)

Profit for the financial year 24.5 19.2

Other comprehensive income:

Items that may be reclassified to profit or loss:

Exchange differences on translation of foreign operations 27 0.4 (0 .1)

Other comprehensive income/(loss) net of tax 0.4 (0 .1)

Total comprehensive income for the year 24.9 19.1

Earnings per share (in pence) for profit attributable

to the ordinary equity holders of the Company

Basic 12 8.24 6.49

Diluted 12 8.09 6.39

The above consolidated statement of profit or loss and comprehensive income should be read in conjunction with the

accompanyingnotes.

Consolidated statement of profit or loss and comprehensive income

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Corporate governance Financial statements Other information

£m Note 2022 2021

Assets

Non-current assets

Goodwill 14 24.7 24.7

Other intangible assets 15 2.9 2.4

Property, plant and equipment 16 1.0 0.8

Right-of-use assets 17 7.1 14.4

Deferred tax assets 18 1.6 1.8

Interests in joint venture 19 0.2 0.3

Total non-current assets 37.5 44.4

Current assets

Trade receivables 20 8.9 6.0

Accrued income 21 6.5 6.3

Prepayments 21 4.5 3.2

Other receivables 21 0.2 1.0

Corporation tax recoverable 21 0.2 –

Cash and cash equivalents 22 18.7 23.1

Total current assets 39.0 39.6

Total assets 76.5 84.0

Liabilities and equity

Current liabilities

Trade and other payables 23 9.5 9.3

Corporation tax 23 – 1.8

Lease liabilities 24 1.3 1.9

Contract liabilities 23 14.8 11.0

Total current liabilities 25.6 24.0

Non-current liabilities

Lease liabilities 24 8.0 15.2

Provisions for other liabilities 25 0.9 1.4

Total non-current liabilities 8.9 16.6

Total liabilities 34.5 40.6

Capital and reserves

Share capital 26 0.3 0.3

Translation reserve 27 0.4 –

Own shares 28 ( 7. 5) (3 .4)

Retained earnings 48.8 46.5

Total equity 42.0 43.4

Total liabilities and equity 76.5 84.0

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

The consolidated financial statements on pages 135 to 174 were approved and authorised for issue by the Board of Directors

on1March2023 and signed on its behalf.

Andrew Denton Duncan Magrath

Chief Executive Officer Chief Financial Officer

Alfa Financial Software Holdings PLC – Registered number 10713517

Consolidated statement of financial position

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

136

£m Note

capital

Own

Translation

reserve

Retained

earnings

Equity

attributable to

owners of the

parent

Balance as at 1 January 2021 0.3 – 0.1 59.8 60.2

Profit for the financial year – – – 19.2 19.2

Other comprehensive loss – – (0 .1) – (0 .1)

Total comprehensive income for the year – – (0 .1) 19.2 19.1

Transactions with owners in their capacity as owners:

Equity-settled share-based payment schemes 29 – – – 1.1 1.1

Equity-settled share-based payment schemes –

deferred tax impact 18 – – – 0.3 0.3

Dividends 31 – – – (32 .7) (3 2 .7)

Own shares distributed 28 – 1.2 – (1. 2) –

Own shares acquired 28 – (4 . 6) – – (4 .6)

Balance as at 31 December 2021 0.3 (3. 4) – 46.5 43.4

Profit for the financial year – – – 24.5 24.5

Other comprehensive income – – 0.4 – 0.4

Total comprehensive income for the year – – 0.4 24.5 24.9

Transactions with owners in their capacity as owners:

Equity-settled share-based payment schemes 29 – – – 1.5 1.5

Equity-settled share-based payment schemes –

deferred tax impact 18 – – – 0.1 0.1

Dividends 31 – – – (22.5) (22.5)

Own shares distributed 28 – 1.5 – (1. 3) 0.2

Own shares acquired 28 – (5.6) – – (5.6)

Balance as at 31 December 2022 0.3 (7. 5) 0.4 48.8 42.0

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated statement of changes in equity

137

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Corporate governance Financial statements Other information

£m Note 2022 2021

Cash flows from operating activities

Profit before tax 28.9 23.8

Net finance costs 0.6 0.8

Share of net loss from joint venture 0.1 0.1

Operating profit 29.6 24.7

Adjustments:

Depreciation 6/16/17 2.2 2.3

Amortisation 6/15 0.8 0.8

Share-based payment charge 29 1.8 1.5

Net gain on disposal of assets (0 . 3) –

Movement in provisions 25 (0 .5) –

Movement in working capital:

Movement in contract liabilities 23 3.8 4.1

Movement in trade and other receivables 20/21 (3 .6) (2. 8)

Movement in trade and other payables (excluding contract liabilities) 23 0.2 0.7

Cash generated from operations 34.0 31.3

Interest element on lease payments 10/24 (0.6) (0. 8)

Income taxes paid (6 . 2) (3.8)

Net cash generated from operating activities 27.2 26.7

Cash flows from investing activities

Purchases of property, plant and equipment 16 (0 .7) (0. 3)

Purchases of computer software 15 (0 .1) (0 .1)

Payments for internally developed software 15 (1. 5) (0 .9)

Net cash used in investing activities (2 .3) (1. 3)

Cash flows from financing activities

Dividends paid to Company shareholders (22.5) (32 .7)

Principal element on lease payments 24 (1. 6) (1 .9)

Purchase of own shares 28 (5 .6) (4. 6)

Cash used in financing activities (2 9 .7) (3 9. 2)

Net decrease in cash (4 . 8) (13 . 8)

Cash and cash equivalents at the beginning of the year 22 23.1 37.0

Effect of foreign exchange rate changes on cash and cash equivalents 0.4 (0 .1)

Cash and cash equivalents at the end of the year 22 18.7 23.1

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Consolidated statement of cash flows

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

138

1. Summary of significant accounting policies

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 venture, and are presented to the

nearest million unless otherwise stated.

The principal activity of the Group is to provide software solutions and consultancy services to the auto and equipment 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 UK-adopted international accounting

standards and Company Law.

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, 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.

On this basis, whilst it is acknowledged that there is continued uncertainty over future economic conditions, 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

In the current year, the Group has applied a number of amendments to IFRS Accounting Standards issued by the International Accounting

Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2022. Their adoption has

not had any material impact on the disclosures or on the amounts reported in these financial statements. The amendments relevant to

the Group are:

• Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and

Contingent Assets; and Annual Improvements 2018-2020 (All issued 14 May 2020, effective from 1 January 2022).

New standards, amendments and interpretations not yet adopted

At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that

have been issued but are not yet effective:

• Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction;

• Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates;

• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Disclosure of Accounting policies; and

• Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.

We are currently in the process of determining if the adoption of the Standards listed above will have a material impact on the financial

statements of the Group.

Notes to the consolidated financial statements

for the year ended 31 December 2022

139

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Corporate governance Financial statements Other information

1. Summary of significant accounting policies contin ued

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.

The Group exercises control over the employee benefit trust because it is exposed to, and has a right to, variable returns from this trust

and is able to use its power over the trust to affect those returns. The trust is therefore consolidated by the Group.

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 the 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 amortised cost. Any surplus

between the nominal and fair value of the loan is recognised as an investment in the joint venture.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

140

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 splits revenue by type of activity but reports operating results on a consolidated basis, as presented to the

CODM, along with the required entity wide disclosure.

The Group discloses revenue split by type of activity being Subscription, Software and Services.

a. Subscription revenues include recurring revenues paid on a monthly or annual basis, including subscription licence revenues,

maintenance and cloud hosting.

b. Software revenues include revenues from the recognition of customised licence revenue, one-off licence fees and any

development revenues.

c. Services revenues are revenues from any work done for customers including pre-implementation, implementation work, and ongoing

services, but excludes any revenue from development work which is disclosed in Software.

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.

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 2022 and 2021 below:

2022 2021

Closing Average Closing Average

USD 1.21 1.24 1.35 1.38

EUR 1.13 1.17 1.19 1.16

NZD 1.90 1.95 1.98 1.95

AUD 1.77 1.78 1.86 1.83

Presentation currency

The consolidated financial statements are presented in pounds sterling. Alfa’s functional and presentation currency is pounds sterling.

141

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Corporate governance Financial statements Other information

1. Summary of significant accounting policies contin ued

1.4 Foreign currency translation continued

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 by type of activity being Subscription, Software and Services (as disclosed in note 1.3).

i Subscription revenue which includes the periodic rights to use Alfa Systems, periodic maintenance, subscription (including cloud

hosting) and one-off revenue relating to catch-up periodic maintenance;

ii Software revenue which includes development revenue (part of the customised licence revenue), options over the right to use Alfa

Systems, and one-off licence fees; and

iii Services revenue which includes software implementation 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:

1.5.1 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.

When a customer is in the process of implementing the software, the transaction price is allocated to this based on the stand-alone selling

prices (derived from standard day rates) and is recognised over time based on the effort incurred, limited to the amount to which Alfa has a

right to payment. Over time recognition is considered appropriate as customers simultaneously receive and consume the benefits provided.

For customers under the Group’s subscription based contracts that are undergoing implementation, revenue for software implementation

services is deemed to be distinct from any other performance obligation and is recognised based on a percentage of completion basis.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

142

When the type of services provided are ongoing services, the transaction price is deemed to be the actual day rate, and revenue is

recognised at a point in time as the service is provided.

1.5.2 Development services and licence services (the customised licence)

Another 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.

During the initial phase of implementing the software, 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 of revenue to which Alfa has the right to payment. See note 5.6 for the accounting policy for variable consideration.

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 is tailored to the customer’s specific requirements; 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.

Revenue attributable to development services is valued using the residual value method as there are no stand-alone selling prices which

are observable as each project is customised. For customers under the Group’s subscription based contracts that are undergoing

implementation, revenue for development services is deemed to be distinct from any other performance obligation and is recognised

based on a percentage of completion basis.

Once the customer is already using the software and the services provided are ongoing development, the transaction price is deemed to

be the actual day rate and revenue is recognised at a point in time as the development service is provided.

1.5.3 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 annualise the value of the customised licence performance obligation and compare it to the annual right to use software

performance obligation post go live.

The value of this option is built up from the start of the implementation project in line with the percentage-of-completion of development

revenue described in 1.5.2 above. Following the completion of the implementation project, the value of this option is recognised evenly

over the expected remaining customer life.

1.5.4 Periodic right to use Alfa Systems

When a customer pays its maintenance fee annually, this performance obligation represents the proportion of this 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.

When a customer pays for its maintenance fee as part of a subscription contract (see section 1.5.6 below), it will not be treated as a

separate performance obligation (and will instead be part of the subscription amount).

1.5.5 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.

1.5.6 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 one or more of 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 .

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1.5 Revenue recognition continued

1.5.7 One-off revenue amounts

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.

Capitalised sales incentive costs

The Group incentivises its sales 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.

Costs to fulfil contracts

The Group has recognised an asset in relation to employee costs to fulfil its long-term development contracts (as disclosed in note 21).

These costs relate directly to the contracts, generate or enhance resources to be used to satisfy performance obligations in the future

and are expected to be recovered. This asset is presented within prepayments in the Statement of Financial Position. These costs are

amortised within cost of sales in line with the percentage of completion of the development project.

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:

• Cost of sales – This includes salaries and other direct costs associated with satisfying customer contracts and for developing software.

• Sales, general and administrative expenses – This includes all the residual operating costs.

1.7 Income tax

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.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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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 2 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.

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.

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1.8 Leases continued

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.

1.9 Impairment of non-financial assets

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.

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.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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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.

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.

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1.12 Trade receivables continued

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 sales, general and administrative 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

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 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

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.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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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.

Commercial viability of new products, modules or capabilities is generally not proven until the major 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 for recognition. 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

Amortisation is presented within sales, general and administrative expenses.

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.

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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.

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 or (where they have an exercise price) by using the Black Scholes model. 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 foreign subsidiaries 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.

Own shares

Own shares represent the shares of the parent company Alfa Financial Software Holdings PLC that are either held by the employee benefit

trust, or acquired by the Group as part of its share buyback programme (see note 28).

Own shares are recorded at cost and deducted from equity.

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 (excluding own shares held).

Diluted earnings per share

Diluted earnings per share is calculated in line with the basic earnings per share calculation above except that the weighted average

number of shares includes all potentially dilutive options granted by the reporting date as if those options had been exercised on the first

day of the accounting period or the date of the grant, if later. The shares have no right to voting or to dividends while held in trust.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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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 customised licence and

implementation revenue streams as well as any maintenance fees during this phase, forms one or a number of performance obligations.

Since the residual value method is used for the customised licence revenue (as explained in note 1.5), the estimation of fair value of

implementation revenue will impact the contract consideration assigned to the customised licence.

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.

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 (if at all) 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 – Estimates feeding through to the customised licence

The customised licence and its associated material right are both impacted by the following estimates:

• 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;

• Estimating the appropriate life of customer relationship: the Group calculates the material right deferral of the customised licence based

on the total customer relationship life. This is also the time over which the material right will be spread; and

• Determining the split of maintenance amount between support efforts and right to use: the Group must estimate what percentage of

the total maintenance fee relates to the customised licence.

A change to the stand-alone selling price for implementation services to the effective day rate, or an increase in expected customer life by

a year, or a 10% variance in the split of maintenance amount between support efforts and right to use, results in an impact on revenue for

the year of up to an increase / decrease of £0.1m.

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2. Critical accounting judgements, estimates and assumptions continued

2.3 Other sources of estimation uncertainty

Revenue recognition – Number of forecast implementation and development days

The Group estimates the number of days required to complete the relevant implementation work and 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 implementation and development services revenue and updates estimates at each quarter end accordingly.

Therefore, a significant movement in total planned days would result in volatility in implementation and customised licence revenue.

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 and foreign

exchange sensitivity

Natural hedging from

localised cost base and

prompt conversion of

foreign currency cash

balances into pound sterling

Use of forward contracts

to manage some of the

foreign exchange risk

Credit risk – cash balances Cash and cash equivalents Credit ratings Diversification of bank deposits

Credit risk – customer

receivables

Trade receivables and

accrued income

Ageing analysis

Credit ratings

Credit checks and

contractual payment terms

Liquidity Cash and cash equivalents Daily cash reporting Cash forecasting and managing

maturity of cash deposits

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.

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 5.4.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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The Group utilised forward contracts during the year to hedge against foreign currency exposure during the current year (2021: no

hedging arrangement entered into). The Group does not have any outstanding commercial foreign exchange contracts at 31 December

2022 or 31 December 2021. No hedge accounting has been applied in the year.

A 10% increase in the USD:GBP exchange rate in the year ended 31 December 2022 would have increased revenue and profit by 4% and

8% respectively. Management believe that 10% is a reasonable sensitivity given historical exchange rate movement.

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 prompt submission of licence and maintenance invoices. 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 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 2022 or 31 December 2021 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 same approach is applied to both trade receivables and accrued income

expected credit loss provisions.

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 2022

and 31 December 2021 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.

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3. Financial risk management continued

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.

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.

31 December 2022

£m Total

Less than

6 months

Between 6 to

12 months

Between 1 to 2

years

Between 2 to 5

years

More than 5

years

Trade and other payables 7.6 7.6 – – – –

Lease liabilities – future lease payments 10.9 0.9 0.9 1.7 4.6 2.8

31 December 2021

£m Total

Less than

6 months

Between 6 to

12 months

Between 1 to 2

years

Between 2 to 5

years

More than 5

years

Trade and other payables 6.9 6.9 – – – –

Lease liabilities – future lease payments 20.3 1.3 1.4 2.7 7.4 7.5

4. Segments and principal activities

4.1 Revenue by stream

The Group assesses revenue by type of activity, being Subscription, Software and Services, as summarised below:

£m 2022 2021

Subscription 27.4 23.5

Software 16.3 13.6

Services 49.6 46.1

Total revenue 93.3 83.2

4.2 Operating profit

The following table reconciles profit for the period attributable to equity holders to Operating Profit for the periods presented:

£m 2022 2021

Profit for the year 24.5 19.2

Adjusted for:

Net loss from joint venture 0.1 0.1

Taxation 4.4 4.6

Finance expense 0.6 0.8

Operating profit 29.6 24.7

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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154

4.3 Non-current assets geographical information

Non-current assets attributable to each geographical market:

£m 2022 2021

UK 34.4 41.3

USA 1.2 0.8

Rest of World 0.3 0.5

Total non-current assets 35.9 42.6

Revenue by geographical market is contained within note 5.3. The table above excludes deferred tax assets for both 2021 and 2022.

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:

£m 2022 2021

Customer A 11% 10%

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 as follows over time and at a point in time in the following

revenue segments:

2022

£m Subscription Software Services

Total

revenue

At a point in time – time and materials – 8.9 33.1 42.0

At a point in time – fixed price – 0.4 0.4 0.8

Over time – time and materials – 6.1 16.1 22.2

Over time – fixed price 27.4 0.9 – 28.3

Total revenue 27.4 16.3 49.6 93.3

2021

£m Subscription Software Services

Total

revenue

At a point in time – time and materials – 5.6 25.2 30.8

At a point in time – fixed price – 2.1 – 2.1

Over time – time and materials – 4.1 19.8 23.9

Over time – fixed price 23.5 1.8 1.1 26.4

Total revenue 23.5 13.6 46.1 83.2

All goods and services are sold directly to customers.

5.3 Revenue geographical information

Revenue attributable to each geographical market based on where the customer mainly utilises its instance of Alfa, or where the service

is rendered, is as follows:

£m 2022 2021

UK 31.0 30.0

USA 33.6 28.9

Rest of EMEA (excl. UK) 21.3 18.7

Rest of World 7.4 5.6

Total revenue 93.3 83.2

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5. Revenue from contracts with customers cont inued

5.4 Revenue by currency

Revenue by contractual currency is as follows:

£m 2022 2021

GBP 39.0

35.9

USD 34.3

30.0

Euro 12.6

11.6

Other 7.4

5.7

Total revenue 93.3

83.2

5.5 Liabilities from contracts with customers

£m 2022 2021

Contract liabilities – deferred licence 8.6

5.3

Contract liabilities – deferred maintenance 6.2

5.7

Total contract liabilities 14.8

11.0

Contract liabilities – deferred licence

Where a customer purchases a perpetual software licence this is generally invoiced upfront 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 customised licence performance obligation. The fair

value of this performance obligation is determined using the residual method as set out in note 1.5.2 and this fair value is recognised as

the development effort is expended, on a percentage of completion basis.

As such the deferred licence contract liability balance as at 31 December 2022 and 31 December 2021 represents any amounts received

in advance for the customised licence 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 deferred licence contract liability. The contract liability relating to the 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 deferred licence 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;

• Decreasing percentage of completion of development efforts; and

• Any additional material right balances that are added during the year.

The deferred licence contract liability balance will decrease during the year as a result 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 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 2022

and 31 December 2021 therefore represents the Group’s unsatisfied period maintenance performance obligation for which the revenue

has been invoiced in advance.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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156

5.6 Unsatisfied performance obligations

During 2020, 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 2022 is £6.2m (2021: £8.4m). We expect to recognise £2.2m in each of the next two financial years and then

the remaining £1.8m in the final financial year of the contract, being 2025.

In addition, the Group has unsatisfied or partially satisfied performance obligations at 31 December 2022 that relate to the licence

customisation for those customers that have ongoing implementation projects. 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 2022, the Group also has unsatisfied or partially

satisfied performance obligations at 31 December 2022 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. The transaction price allocated to these unsatisfied or partially

satisfied performance obligations as at 31 December 2022 is £11.0m (2021: £11.1m). 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 may be 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.

The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about the unsatisfied

performance obligations that have original expected durations of one year or less. This includes those performance obligations linked

to ongoing services for all project types (i.e. subscription, software and services).

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.

The Group has variable consideration in the form of contract banding for its licence and maintenance volumes. It is included it in the

transaction price only to the extent that it is highly probable that a significant reversal of revenue will not occur when the uncertainty

associated with the variable consideration is subsequently resolved.

6. Operating profit

The following items have been included in arriving at operating profit in the table below:

£m 2022 2021

Research and development costs 2.2 1.6

Depreciation of property, plant and equipment 0.5 0.4

Depreciation of right-of-use lease assets 1.7 1.9

Amortisation of intangible assets 0.8 0.8

Foreign exchange (gain)/loss (1.1) 0.2

Share-based payments (including social security contributions) 1.8 1.5

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7. Personnel-related costs

£m 2022 2021

Wages and salaries 34.8 31.8

Social security contributions (on wages and salaries) 4.4 3.9

Pension costs 2.6 2.1

Profit share pay* 3.5 3.1

Share-based payments** 1.8 1.5

Total employment costs 47.1 42.4

* Profit share pay refers to a pool of money (that equates to approximately 10% of the Group’s pre-tax profits) which is shared amongst the

employees, excluding Directors and some other senior managers, as a percentage of basic salary. The amount disclosed includes the related

social security contributions.

** This includes the related social security contributions.

Average monthly number of people employed based on location of home office

(including Executive Directors) 2022 2021

UK 307 282

USA 75 71

Rest of World 38 30

Total average monthly number of people employed 420 383

At 31 December 2022 the Group had 441 employees (2021: 382).

8. Key management

Key management compensation (including Directors):

£m 2022 2021

Wages, salaries and short-term benefits 2.7 3.1

Social security contributions 0.3 0.4

Post-employment benefits 0.1 0.1

Share-based payments* 1.1 0.9

Total key management compensation 4.2 4.5

* This includes the related social security contributions.

Key management personnel consist of the Company Leadership Team and the Executive and Non-Executive Directors. Directors’

remuneration is detailed in the Remuneration Report.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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158

9. Auditor’s remuneration

The Group obtained the following services from the Group’s auditor as detailed below:

£m 2022 2021

Audit fees

RSM UK Audit LLP

Audit of the consolidated financial statements 0.2 0.2

Audit of subsidiaries 0.2 0.2

Total audit fees 0.4 0.4

Audit-related assurance fees

Review of interim financial report 0.1 0.1

Total audit-related assurance fees 0.1 0.1

Non-audit services – –

Total audit and non-audit-related services 0.5 0.5

10. Finance income and expense

£m 2022 2021

Finance income

Interest income on cash or short-term bank deposits – –

£m Note 2022 2021

Finance expense

Interest on lease liabilities 24 (0.6) (0.8)

Total finance expense (0.6) (0.8)

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11. Income tax expense

Analysis of charge for the year

£m 2022 2021

Current tax:

Current tax on profit for the year 5.2 4.5

Adjustment in respect of prior years (1.4) (0.5)

Foreign tax on profit of subsidiaries for the current year 0.3 0.3

Current tax 4.1 4.3

Deferred tax:

Origination and reversal of temporary differences 0.2 (0.1)

Adjustment in respect of prior years 0.1 0.6

Effect of changes in tax rates – (0.2)

Deferred tax 0.3 0.3

Total tax charge in the year 4.4 4.6

The effective tax rate for the year is lower (2021: higher) than the standard rate of corporation tax in the UK. The effective tax rate for

the year ended 31 December 2022 was 15.2% (2021: 19.3%). The effective tax rate for the year is impacted by favourable adjustments in

respect to prior years totalling £1.3m (2021: unfavourable adjustment of £0.1m), due to the benefit of the UK R&D claim for 2021 of £0.9m

and favourable adjustments in respect of prior year provisions of £0.4m (2021: increased tax costs for prior year of £0.2m, an adjustment

in respect to deferred tax on share awards of £0.5m, less the benefit of the UK R&D claim for 2020 of £0.6m). Given the changes in the UK

R&D tax regime, the benefit to Alfa is expected to reduce in the future and as a consequence the effective tax rate will trend towards the

UK statutory tax rate.

The overall tax charge for the year is reconciled as follows:

Analysis of charge for the year

£m 2022 2021

Profit on ordinary activities before taxation 28.9

23.8

Profit on ordinary activities at the standard rate of corporation tax – 19% 5.5

4.5

Tax effects of:

Effect of different tax rates of subsidiaries operating in other jurisdictions 0.1

0.1

Adjustment in respect of prior years (1.3)

0.1

Impact of tax rate changes –

(0.2)

Other 0.1

0.1

Total tax charge for the year 4.4

4.6

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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160

12. Earnings per share

2022 2021

Profit attributable to equity holders of Alfa (£m) 24.5

19.2

Weighted average number of shares outstanding during the year 296,309,874

296,709,610

Basic earnings per share (pence per share) 8.24

6.49

Weighted average number of shares outstanding including potentially dilutive shares 302,038,789

301,505,177

Diluted earnings per share (pence per share) 8.09

6.39

The weighted average number of ordinary shares in issue excludes 3,690,126 (2021: 3,290,390) shares, being the weighted average

number of shares held by the Group under the employee benefit trust and in Treasury as a result of the share buyback programme. The

diluted number of ordinary shares outstanding, including share awards, is calculated on the assumption of conversion of all 5,728,914

(2021: 5,470,741) potentially dilutive ordinary shares. The increase in both Basic EPS and Diluted EPS in the current year is impacted by the

Group’s share buyback programme that commenced in 2022.

13. Financial assets and liabilities

£m Note 2022 2021

Financial assets

Financial assets at amortised cost:

Trade receivables 20 8.9

6.0

Other financial assets at amortised cost 21 6.7

7.3

Cash and cash equivalents 22 18.7

23.1

Total financial assets 34.3

36.4

Financial liabilities

Financial liabilities at amortised cost:

Trade and other payables 23 7.6

6.9

Lease liabilities 24 9.3

17.1

Total financial liabilities 16.9

24.0

14. Goodwill

£m 2022 2021

Cost

At 1 January 24.7

24.7

At 31 December 24.7

24.7

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 pre-tax discount rate of 12.2% (2021: 11.0%) which is based on the CGU’s weighted

average cost of capital. Cash flows beyond these periods have been extrapolated using a steady 2.5% (2021: 2.0%) average growth rate

which is reflective of management’s best estimate at the time. 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.

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15. Other intangible assets

£m

Computer

software

Internally

generated

software Total

Cost

At 1 January 2021 1.5 2.2 3.7

Additions 0.1 0.9 1.0

At 31 December 2021 1.6 3.1 4.7

Amortisation

At 1 January 2021 0.8 0.7 1.5

Charge for the year 0.1 0.7 0.8

At 31 December 2021 0.9 1.4 2.3

Net book value

At 31 December 2021 0.7 1.7 2.4

Cost

At 1 January 2022 1.6 3.1 4.7

Additions 0.1 1.5 1.6

Disposals – (0.3) (0.3)

At 31 December 2022 1.7 4.3 6.0

Amortisation

At 1 January 2022 0.9 1.4 2.3

Charge for the period 0.1 0.7 0.8

Disposals – – –

At 31 December 2022 1.0 2.1 3.1

Net book value

At 31 December 2022 0.7 2.2 2.9

Significant movement in other intangible assets

During 2022, Alfa developed new internally generated software at a cost of £1.5m (2021: £0.9m). This software will be amortised over three

to five years.

The total research and product development expense for the period was £2.2m (2021: £1.6m).

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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162

16. Property, plant and equipment

£m

Fixtures and

fittings IT equipment Total

Cost

At 1 January 2021 1.2 3.3 4.5

Additions – 0.3 0.3

Disposals – (0.1) (0.1)

At 31 December 2021 1.2 3.5 4.7

Depreciation

At 1 January 2021 0.7 2.9 3.6

Charge for the year 0.1 0.3 0.4

Disposals – (0.1) (0.1)

At 31 December 2021 0.8 3.1 3.9

Net book value

At 31 December 2021 0.4 0.4 0.8

Cost

At 1 January 2022 1.2 3.5 4.7

Additions 0.4 0.3 0.7

Disposals (0.1) – (0.1)

At 31 December 2022 1.5 3.8 5.3

Depreciation

At 1 January 2022 0.8 3.1 3.9

Charge for the year 0.2 0.3 0.5

Disposals (0.1) – (0.1)

At 31 December 2022 0.9 3.4 4.3

Net book value

At 31 December 2022 0.6 0.4 1.0

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17. Right-of-use assets

£m Motor vehicles Property Total

Cost

At 1 January 2021 0.2 17.9 18.1

Additions 0.2 1.3 1.5

At 31 December 2021 0.4 19.2 19.6

Depreciation

At 1 January 2021 0.1 3.2 3.3

Charge for the year 0.1 1.8 1.9

At 31 December 2021 0.2 5.0 5.2

Net book value

At 31 December 2021 0.2 14.2 14.4

Cost

At 1 January 2022 0.4 19.2 19.6

Additions 0.1 – 0.1

Disposals – (8.3) (8.3)

At 31 December 2022 0.5 10.9 11.4

Depreciation

At 1 January 2022 0.2 5.0 5.2

Charge for the year 0.1 1.6 1.7

Disposals – (2.6) (2.6)

At 31 December 2022 0.3 4.0 4.3

Net book value

At 31 December 2022 0.2 6.9 7.1

The disposal relates to the assignment of the lease to the 9th floor of Moor Place, 1 Fore Street Avenue, London. Refer to note 32.

The Group recognised the following amounts in the consolidated statement of profit or loss and comprehensive income in relation to

leases under IFRS 16:

£m 2022 2021

Depreciation (1.7) (1.9)

Interest expense (0.6) (0.8)

Short-term lease expense (0.2) (0.2)

Sub-lease rentals

One of the leased properties was being sub-leased to tenants under operating leases, with rentals payable quarterly. This sub-lease ended

during 2022. Minimum lease payments receivable on these sub-leases of property are as follows:

£m 2022 2021

Within one year – –

Later than one year but not later than five years – –

Later than five years – –

Total sub-lease payments receivable – –

Income from sub-lease in the year 0.5 0.5

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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164

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 accruals and share-based payments.

£m 2022 2021

Balance as at 1 January 1.8 1.8

Effect of changes in tax rates – 0.2

Adjustments in respect of prior period (0.1) (0.6)

Deferred income taxes recognised in the consolidated statement of profit or loss

and comprehensive income (0.2) 0.1

Deferred tax on share-based payments recognised in reserves 0.1 0.3

Balance as at 31 December 1.6 1.8

Consisting of:

Depreciation in excess of capital allowances (0.1) –

Other timing differences 1.7 1.8

Balance as at 31 December 1.6 1.8

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 £4.1m at 31 December 2022 (2021: £3.4m).

At the reporting date, 75% (2021: 72%) of the provision for deferred tax relates to the UK.

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 auto and equipment finance industry. 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

£m 2022 2021

Carrying amount as at 1 January 0.2 0.3

Share of net loss from the joint venture (0.1) (0.1)

Carrying amount as at 31 December 0.1 0.2

Loan to joint venture

£m 2022 2021

Carrying amount as at 1 January 0.1 0.1

Interest – –

Carrying amount as at 31 December 0.1 0.1

The total loss from interest in joint venture is £0.1m (2021: £0.1m) and the total interest in the joint venture is £0.2m (2021: £ 0.3m) .

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20. Trade receivables

£m 2022 2021

Trade receivables 8.9 6.0

Provision for impairment – –

Trade receivables – net 8.9 6.0

Ageing of trade receivables

Ageing of net trade receivables £m 2022 2021

Within agreed terms 6.4 4.1

Past due 1-30 days 2.4 1.2

Past due 31-90 days 0.1 0.6

Past due 91+ days – 0.1

Trade receivables – net 8.9 6.0

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

£m 2022 2021*

GBP 4.5 3.4

USD 2.7 2.4

Other 1.7 0.2

Trade receivables – net 8.9 6.0

* The 2021 USD figure was originally stated to be £0.9m and included only USD balances held in the US subsidiary. This has been restated to £2.4m to include

USD balances within UK subsidiaries as well with a corresponding reduction in the GBP balances, and so has no impact on the overall total.

Trade receivables due from significant customers

Customers with revenue accounting for more than 10% of total revenue in the current year have outstanding trade receivables as follows:

£m 2022 2021

Customer A 0.7 0.8

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.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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21. Other receivables held at amortised cost

£m 2022 2021

Accrued income 6.5 6.3

Prepayments 4.5 3.2

Corporation tax recoverable 0.2 –

Other receivables 0.2 1.0

Total other receivables held at amortised cost 11.4 10.5

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 increased by £0.2m. The current year balance represents unbilled professional fees for work in progress, and £0.5m of

one-off licence revenue items where there is contractual agreement to invoice in subsequent periods.

Prepayments include £1.7m (2021: £1.1m) of deferred costs in relation to costs to fulfil contracts – see note 1.5. During the year £0.3m

(2021: £0.2m) relating to costs to fulfil contracts has been recognised within cost of sales.

22. Cash and cash equivalents

£m 2022 2021

Cash at bank and in hand 18.7 23.1

Cash and cash equivalents 18.7 23.1

Currency of cash and cash equivalents

£m 2022 2021

GBP 10.0 14.9

USD 4.3 4.4

AUD 2.1 1.3

EUR 1.9 2.0

Other 0.4 0.5

Cash and cash equivalents 18.7 23.1

Cash and cash equivalents are all held with banks and other financial instructions which must fulfil credit rating and investment criteria

approved by the Board.

23. Current and non-current liabilities

£m 2022 2021

Trade payables 0.8 0.8

Other payables 8.7 8.5

Corporation tax – 1.8

Contract liabilities – deferred licence 8.6 5.3

Contract liabilities – deferred maintenance 6.2 5.7

Lease liabilities (note 24) 9.3 17.1

Provisions for other liabilities 0.9 1.4

Total current and non-current liabilities 34.5 40.6

Less non-current portion (8.9) (16.6)

Total current liabilities 25.6 24.0

Other payables includes amounts relating to other tax and social security of £1.9m (2021: £2.4m). Of the remainder, £5.3m (2021: £4.1m)

relates to amounts due as part of payroll.

The corporation tax payable of £1.8m in 2021 is a receivable in 2022 (see note 21).

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24. Lease liabilities

The following table sets out the reconciliation of the lease liabilities from 1 January to the amount disclosed at 31 December:

£m 2022 2021

Lease liabilities recognised at 1 January 17.1 17.5

Additions 0.1 1.5

Disposals (6.3) –

Interest charge 0.6 0.8

Payments made on lease liabilities (2.2) (2.7)

At 31 December 9.3 17.1

Additions to lease liabilities include extensions to existing lease agreements. Refer to note 32.3 for more information on the disposal. Total

lease payments in 2022 were £2.4m (2021: £2.9m).

Below is the maturity analysis of the lease liabilities:

£m 2022 2021

Non-current 8.0 15.2

Current 1.3 1.9

Total lease liabilities 9.3 17.1

No later than one year 1.8 2.7

Between one year and five years 6.2 10.1

Later than five years 2.9 7.5

Total future lease payments 10.9 20.3

Total future interest payments (1.6) (3.2)

Total lease liabilities 9.3 17.1

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. These are the only changes in liabilities arising

from financing activities in the year.

25. Provision for other liabilities

£m

At 1 January 2021 1.4

Provided in the period 0.7

Utilised in the period (0.1)

Released in the period (0.6)

At 31 December 2021 1.4

Provided in the period 0.3

Utilised in the period (0.3)

Released in the period (0.5)

At 31 December 2022 0.9

Provisions for other liabilities comprise amounts for office dilapidations, employer taxes on share-based payments and legal matters.

It is expected that these will be utilised by as follows: £0.2m in 2030 and £0.7m over various years.

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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168

26. Share capital

2022 2021

Issued and fully paid Shares £m Shares £m

Ordinary shares – 0.1 pence 300,000,000 0.3 300,000,000 0.3

Balance as at 31 December 300,000,000 0.3 300,000,000 0.3

No additional shares have been issued or cancelled in the year ended 31 December 2022.

27. Translation reserve

£m 2022 2021

At 1 January – 0.1

Currency translation of subsidiaries 0.4 (0.1)

At 31 December 0.4 –

28. Own shares

£m 2022 2021

Balance at 1 January 3.4 –

Acquired in the year 5.6 4.6

Distributed on exercise of options (1.5) (1.2)

Balance at 31 December 7.5 3.4

On 18 January 2022 the Group announced the launch of a share buyback programme. Refer to the Company website for more details.

The own shares reserve represents the cost of shares in Alfa Financial Software Holdings PLC that have been:

• Purchased in the market and held by the Group’s employee benefit trust to satisfy options under the Group’s share options plans.

The number of shares held at 31 December 2022 were 2,163,952 (2021: 2,590,260); and

• Purchased in the market and held by the Group as a result of the share buyback programme that was launched on 18 January 2022.

The number of shares held at 31 December 2022 were 2,832,073 (2021: nil).

Own shares distributed relate to shares distributed to employees from the employee benefit trust for bonus awards under share

schemes. As at 31 December 2022, the Group held 1.67% (2021: 0.86%) of its own called-up share capital.

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29. Share awards

The Group recognised total expenses relating to share-based payment of £1.8m (2021: £1.5m) in the current year. Of this, £1.6m (2021:

£1.5m) relates to equity-settled LTIP schemes and £0.2m (2021: £0.0) relates to Employee Share Save schemes. See further detail below.

The outstanding share schemes are made up of the following:

Grant date Condition Type Plan Vesting date

Exercise

price

Share options

31 December

2022

Share options

31 December

2021

November 2019 Service Only LTIP November 2022 0p – 1,113,909

June 2020 Service and Performance LTIP June 2023 0p 2,322,473 2,322,473

April 2021 Service and Performance LTIP April 2024 0p 1,070,668 1,121,104

November 2021 Service Only LTIP October 2024 0p 60,872 60,872

November 2021 Service Only UK Employee ShareSave January 2025 153.6p 397,228 774,659

November 2021 Service Only US Employee ShareSave January 2024 167.0p 70,515 77,724

April 2022 Service and Performance LTIP April 2025 0p 741,162 –

April 2022 Service Only LTIP April 2025 0p 237,965 –

April 2022 Service Only US Employee ShareSave December 2024 141.1p 36,731 –

May 2022 Service Only UK Employee ShareSave December 2025 132.8p 530,320 –

September 2022 Service Only LTIP September 2025 0p 5,917 –

The weighted average share price at the date of exercise for share options exercised during the period was 150.0p (2021: 130.4p). The

options outstanding at 31 December 2022 had a weighted average exercise price of 27.1p (2021: 24.1p), and a weighted average remaining

contractual life of 1.2 years (2021: 1.7 years). The opening weighted average exercise price at 1 January 2022 was 24.1p (1 January 2021: nil).

The weighted average exercise price of options forfeited and exercised during the year was 128.5p (31 December 2021: nil). The expected

price volatility is based on the historical volatility adjusted for any expected changes to future volatility due to publicly available information.

The total share-based payment charge relating to Alfa Financial Software Holdings PLC shares for the year is split as follows:

£m 2022 2021

Employee share schemes – value of services 1.5 1.1

Expense in relation to fair value of social security liability on employee share schemes 0.3 0.4

Total cost of employee share schemes 1.8 1.5

Details of the share options outstanding during the year are as follows:

2022 2021

Outstanding at 1 January 5,470,741 6,139,161

Conditionally awarded in year 1,552,095 2,034,359

Exercised (1,032,382) (2,575,681)

Forfeited or expired in year (516,603) (127,098)

Outstanding at 31 December 5,473,851 5,470,741

Exercisable at the end of the year – –

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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170

29.1 LTIPs

The 2019 November LTIP awards vested during the year. The exercise of these awards had a net impact of £0.4m on own shares and £1.3m

on retained earnings.

The 2020 June LTIP and 2021 April LTIP awards (service and performance conditions) are conditional on performance conditions, 50%

based on EPS performance (non-market condition) and 50% on TSR (market condition) as well as a three-year employment fulfilment.

The fair value of these awards has been determined using the Monte Carlo model / Black Scholes model at the grant date.

The 2021 November LTIP awards are conditional on employment only. The fair value of these awards is equal to the closing share price

on the date of grant, discounted by the expected 12-month dividend yield to reflect the lack of dividend accrual over the vesting period

(three years). The expected price volatility is based on the historical volatility (based on the remaining life of the scheme), adjusted for any

expected changes to future volatility due to publicly available information.

The 2022 April LTIP awards (service and performance conditions plan) are granted conditional on performance conditions, 50% based

on EPS performance (non-market condition) and 50% on TSR (market condition) as well as a three-year employment fulfilment. For those

share schemes with market-related vesting conditions, the fair value has been determined using the Black Scholes 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. The following table lists the inputs to the model used for the awards granted in the year ended 31 December 2022 based

on information at the date of grant:

LTIP awards (granted in April) TSR element EPS element

Share price at date of grant 164p 164p

Award price 0p 0p

Volatility 57.8% 0.0%

Embedded TSR 13.9% –

Average correlation 39.3% –

Life of award 3 years 3 years

Risk-free rate 1.53% –

Fair value per award 88p 147p

In April and September 2022, the Group awarded to certain employees a LTIP conditional on employment only. The fair value of these

awards on the date of grant is 147p, discounted by the expected 12-month dividend yield to reflect the lack of dividend accrual over the

vesting period (three years).

All of these Company schemes, as well as any non-cyclical awards, are equity-settled by award of ordinary shares.

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29. Share awards continued

29.2 Employee ShareSave Scheme

The Group has in place an Employee ShareSave Scheme – the Save As You Earn (SAYE) scheme in the UK and Employee Stock Purchase

Plan (ESPP) scheme in the US. The scheme started in 2021 but there were new grants in 2022 as well. Under these schemes, eligible

employees can save up to a set limit each month. At the end of the savings period (three years for SAYE and two years for ESPP),

employees can choose whether or not they wish to buy the shares at the option price or take back their savings as cash. The option price is

the share price at the start of the plan with a 20% discount for the UK scheme and 15% discount for the US scheme. The fair value of these

awards have been determined using the Black Scholes model at the grant date.

31 December 2022

SAYE ESPP

Number of

share options

Exercise

price

Number of

share options

Exercise

price

Outstanding at beginning of year 774,659 154p 77,724 167p

Conditionally awarded in year 530,320 138p 36,731 141p

Forfeited or expired in year (243,732) 154p (7,209) 167p

Replaced in year (i.e. left the 2021 plan to join the 2022 plan) (133,699) 154p – –

Outstanding at the end of the year* 927,548 145p 107,246 158p

Exercisable at the end of the year – – – –

* The exercise price is a weighted average.

The inputs used in the calculation of the fair value of options granted in the year were as follows:

SAYE

31 December

2022

ESPP

31 December

2022

Share price 184p 164p

Exercise price 138p 141p

Expected volatility 56.8% 58.5%

Expected life 36 months 24 months

Risk-free rate 1.67% 1.51%

Expected dividend yields 3.40% 3.40%

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

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172

30. Unrecognised items

30.1 Contingencies and commitments

The Group has no capital commitments, no material contingent liabilities and no contingent assets.

30.2 Events occurring after the reporting period

As part of the share buyback programme, the Company has acquired shares in Alfa Financial Software Holdings PLC in the period between

1 January 2023 and 1 March 2023. See alfasystems.com/investors. There have been no other reportable subsequent events.

31. Dividends

A 2021 ordinary dividend of 1.1 pence per share was paid on 24 June 2022 amounting to £3.3m (2021: £3.0m).

A special dividend of 3.0 pence per share was paid on 16 June 2022 amounting to £8.9m (2021: £29.7m).

A 2022 special dividend of 3.5 pence per share was paid on 7 October 2022 amounting to £10.3m (2021: £nil).

Subject to approval at the Annual General Meeting on 26 April 2023, a 2022 final dividend of 1.2 pence per share will be paid on 26 June

2023 to holders on the register on 26 May 2023. The ordinary shares will be quoted ex-dividend on 25 May 2023. In addition, the Board

has decided to declare a special dividend of 1.5 pence per share, with an ex-dividend date of 13 April 2023, a record date of 14 April 2023

and a payment date of 9 May 2023.

32. Related parties

32.1 Controlling shareholder

The ultimate parent undertaking is CHP Software and Consulting Limited (the ‘Ultimate 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.

32.2 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.

Registered address and country

of incorporation Principal activity

Held by

Company

2022

Held by

Group

2022

Held by

Company

2021

Held by

Group

2021

Alfa Financial Software

Group Limited

Moor Place, 1 Fore Street Avenue,

London, EC2Y 9DT, UK

Holding

company

100% 100% 100% 100%

Alfa Financial

Software Limited

Moor Place, 1 Fore Street Avenue,

London, EC2Y 9DT, UK

Software

and services

– 100% – 100%

Alfa Financial Software Inc 124 E Hudson Ave, Royal Oak, MI

48067, United States

Software

and services

– 100% – 100%

Alfa Financial Software

Australia Pty Limited

Lisgar House, Level 3, 32

Carrington Street,

Sydney, NSW, 2000, Australia

Services – 100% – 100%

Alfa Financial Software

NZ Limited

Level 1 Building B, 600 Great South

Road, Greenlane, Auckland 1051,

New Zealand

Services – 100% – 100%

Alfa Financial Software GmbH Bockenheimer Landstraße 20,

60323 Frankfurt am Main,

Germany

Software

and services

– 100% – 100%

Alfa Financial Software

International Limited

Moor Place, 1 Fore Street Avenue,

London, EC2Y 9DT, UK

Software

and services

– 100% – –

Alfa iQ Moor Place, 1 Fore Street Avenue,

London, EC2Y 9DT, UK

Software

and services

– 51% – 51%

Alfa Financial Software International Limited was established in February 2022 .

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32. Related parties continued

32.3 Transactions with related parties

Full details of the Directors’ compensation and interests are set out in the Directors’ Remuneration Report on pages 97 to 120.

See note 8 for further detail on remuneration of key management (including Directors).

Dividends to the amount of £15.0m were paid to the Ultimate Parent (2021: £21.7m).

Dividends of 3 pence, 1.1 pence and 3.5 pence per share were paid to all shareholders in 2022 (2021: 1 pence and 10 pence per share).

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 117.

The balances outstanding from the Ultimate Parent at 31 December 2022 and 2021 were £nil and £nil respectively.

In 2020 the Group invested £0.4m in Alfa IQ consisting of: a capital contribution of £0.3m; and an interest-free loan fair valued at £0.1m.

At 31 December 2022 the value of the investment is carried at £0.1m (2021: £0.2m) and the loan fair valued at £0.1m (2021: £0.1m).

On 9 February 2022, the Company entered into a short-term rental agreement with the Ultimate Parent for rental of the 9th Floor of Moor

Place. The resulting rental income for 2022 was £0.4m (2021: £nil).

The Company also received rental income of £3,718 (2021: £34,610) in the year relating to its prior arrangement with the Ultimate Parent

for the rental of a meeting room on the 9th Floor of Moor Place.

On 29 July 2022 the Group reached an agreement for the assignment of its lease to the 9th floor of Moor Place, 1 Fore Street Avenue,

London to the Ultimate Parent. There is no consideration for the transaction, with the Ultimate Parent taking on all the rights and liabilities

for the 9th floor from Alfa. The assignment of the lease resulted in the de-recognition of the right to use asset and lease liability, which

resulted in a one-off gain of £0.6m which was fully recognised in the year.

There were no other outstanding receivable balances from related parties at the end of the reporting period.

33. 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 2022 and 31 December 2021

in the consolidated statement of financial position.

31 December 2022

£m

Gross

amounts

Amounts

offset

Net amounts

presented

Accrued income 15.6 (9.1) 6.5

Contract liabilities – deferred licence (17.7 ) 9.1 (8.6)

31 December 2021

£m

Gross

amounts

Amounts

offset

Net amounts

presented

Accrued income 14.0 ( 7.7) 6.3

Contract liabilities – deferred licence (13.0) 7.7 (5.3)

Notes to the consolidated financial statements

for the year ended 31 December 2022 continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

174

£m Note 2022 2021

Assets

Non-current assets

Investment in subsidiary companies 4 428.7 427.6

Total non-current assets 428.7 427.6

Current assets

Other receivables 5 0.6 0.1

Cash and cash equivalents 6 0.3 0.1

Total current assets 0.9 0.2

Total assets 429.6 427.8

Liabilities and equity

Current liabilities

Amounts owed to subsidiaries 7 3.1 39.9

Other payables 8 0.6 0.7

Accruals 0.4 0.4

Total current liabilities 4.1 41.0

Non-current liabilities

Provisions 8 0.3 0.2

Total non-current liabilities 0.3 0.2

Total liabilities 4.4 41.2

Capital and reserves

Ordinary shares 9 0.3 0.3

Own shares 10 ( 7.5) (3.4)

Retained earnings 432.4 389.7

Total equity 425.2 386.6

Total liabilities and equity 429.6 427.8

Retained earnings includes a profit of £65.0m for the 2022 financial year (31 December 2021: £74.8m). 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 175 to 181 were approved and authorised for issue by the Board of Directors on

1March2023 and signed on its behalf.

Andrew Denton Duncan Magrath

Chief Executive Officer Chief Financial Officer

Alfa Financial Software Holdings PLC

Registered number 10713517

Company statement of financial position

175

Strategic report

Corporate governance Financial statements Other information

£m Note

Called-up share

capital

Own

Retained

earnings Total equity

Balance as at 1 January 2021 0.3 – 347.7 348.0

Total comprehensive profit for the period – – 74.8 74.8

Employee share schemes – value of employee services 11 – – 1.1 1.1

Dividends 12 – – (32.7) (32.7)

Own shares distributed 10 – 1.2 (1.2) –

Own shares acquired 10 – (4.6) – (4.6)

Balance as at 31 December 2021 0.3 (3.4) 389.7 386.6

Total comprehensive profit for the period – – 65.0 65.0

Employee share schemes – value of employee services 11 – – 1.5 1.5

Dividends 12 – – (22.5) (22.5)

Own shares distributed 10 – 1.5 (1.3) 0.2

Own shares acquired 10 – (5.6) – (5.6)

Balance as at 31 December 2022 0.3 (7.5) 432.4 425.2

As at 31 December 2022 £4.8m (2021: £3.4m) 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.

Company statement of changes in equity

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

176

1. Summary of significant accounting policies

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 in note 1 to the consolidated financial

statements. 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 stress testing in line with FRC guidance.

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 £m.

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.

This 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 Company exercises control over the employee benefit trust because it is exposed to, and has a right to, variable returns from this trust

and is able to use its power over the trust to affect those returns. Therefore the trust is consolidated by the Company.

1.2 Investments in subsidiaries

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 due to 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.

Notes to the Company financial statements

For the year ended 31 December 2022

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Corporate governance Financial statements Other information

Notes to the Company financial statements

For the year ended 31 December 2022 continued

1. Summary of significant accounting policies contin ued

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.

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.

Own shares

Own shares represent the shares of Alfa Financial Software Holdings PLC that are either held by the employee benefit trust, or acquired by

the Group as part of its share buyback programme (see note 28 to the consolidated financial statements). Own shares are recorded at cost

and deducted from equity.

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 (as a capital contribution). For full details of the Group’s

share-based payments, refer to note 29 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.

The inputs applied in the impairment review for the value-in-use calculation for the investments in subsidiaries are considered to be a key

source of estimation uncertainty. Refer to note 4 for more details.

There were no other 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.

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

178

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.

4. Investments in subsidiaries

£’000s 2022 2021

Cost

As at 1 January 427.6 348.7

Capital contributions to subsidiaries 1.1 0.9

Reversal of impairment – 78.0

As at 31 December 428.7 427.6

The carrying amount of the investment is £428.7m at 31 December 2022 (2021: £427.6m). 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 pre-tax discount rate of 12.2% (2021: 11.0%). Cash flows beyond these periods have been

extrapolated using a steady 2.5% (2021: 2.0%) average growth rate which is reflective of management’s best estimate at the time. In

addition, the market capitalisation of the Company as at31 December 2022 was £493m. 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.

As the circumstances that resulted in an impairment charge in 2018 of £78.0m no longer applied, it was reversed in 2021.

5. Other receivables

At 31 December 2022, other receivables relate to prepayments of £0.6m (2021: £0.0m) and VAT receivables of £0.0m (2021: £0.1m).

6. Cash and cash equivalents

£m 2022 2021

Cash and cash equivalents 0.3 0.1

7. Amounts owed to subsidiaries

£m 2022 2021

Amounts owed to subsidiaries – current 3.1 39.9

Amounts owed to subsidiaries – non-current – –

Total amounts owed to subsidiaries 3.1 39.9

Current amounts owed to subsidiaries of £3.1m relate primarily to cash advanced by Alfa Financial Software Limited to the Company for

operating costs payment (2021: £39.9m for dividend payments).

8. Other payables and provision for other liabilities

Other payables relate to accruals of social security and other taxes of £0.0m (2021: £0.0m), trade creditors of £0.1m (2021: £0.1m)

andsalary costs of £0.5m (2021: £0.6m).

Long-term provision relates to the employer national insurance contributions of £0.3m on the 2022, 2021 and 2020 share grant expense

that relates totheemployees of the Company (2021: £0.2m).

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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 fully paid

Shares –

ordinary £m

At 31 December 2022 300,000,000 0.3

At 31 December 2021 300,000,000 0.3

10. Own shares

2022

£m

2021

£m

Balance at 1 January 3.4 –

Acquired in the year 5.6 4.6

Distributed on exercise of options (1.5) (1.2)

Balance at 31 December 7.5 3.4

The own shares reserve represents the cost of shares in Alfa Financial Software Holdings PLC purchased in the market and held by

theCompany’s employee benefit trust and by the Group as a result of its share buyback programme (see note 1.2 of the consolidated

financial statements.

The number ofown shares held by the employee benefit trust at 31 December 2022 was 2,163,952 (2021:2,590,260). The number ofown

shares held at 31 December 2022 by the Group as a result of its share buyback programme was 2,832,073 (2021: nil).

As at 31 December 2022, the Company held 1.67% (2021: 0.86%) of its own called-up share capital.

11. Employee share schemes

Under the rules of the Company’s LTIP plans, on 1 November 2019, 2 June 2020, 30 April 2021, 30 November 2021, 12 April 2022 and

20September2022 selected employees of theCompany’s subsidiaries were granted awards in the form of nil cost options over ordinary

sharesinAlfa.

On 3 May 2022 (SAYE) and 12 April 2022 (ESPP), employees of theCompany’s subsidiary that met the set criteria were invited to join a

ShareSave Scheme – the SAYE scheme for the UK employees and the ESPP scheme for the US employees. Under these schemes, eligible

employees can save up to a set limit eachmonth and at the end of the vesting period can use these savings to buy ordinary shares in Alfa

(at a discount) or take these back as cash.

Refer to note 29 of the consolidated financial statements for more detail on these schemes. The cost of the share-based remuneration

ispassed to the relevant subsidiary.

12. Dividends

A 2021 ordinary dividend of 1.1 pence per share was paid on 24 June 2022 amounting to £3.3m (2021: £3.0m).

A special dividend of 3.0 pence per share was paid on 16 June 2022 amounting to £8.9m (2021: £29.7m).

A 2022 special dividend of 3.5 pence per share was paid on 7 October 2022 amounting to £10.3m (2021: £nil).

Subject to approval at the Annual General Meeting on 26 April 2023, a 2022 final dividend of 1.2 pence per share will be paid on 26 June

2023 to holders on the register on 26 May 2023. The ordinary shares will be quoted ex-dividend on 25 May 2023. In addition, the Board

has decided to declare a special dividend of 1.5 pence per share, with an ex-dividend date of 13 April 2023, a record date of 14 April 2023

and a payment date of 9 May 2023.

Refer to note 31 of the consolidated financial statements for more detail.

Notes to the Company financial statements

For the year ended 31 December 2022 continued

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

180

13. 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 97 to 120.

14. Events occurring after the reporting period

As part of the share buyback programme, the Company has acquired shares in Alfa Financial Software Holdings PLC in the period between

1 January 2023 and 1 March 2023. See alfasystems.com/investors.

There have been no other reportable subsequent events.

15. 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 the Company’s subsidiaries and joint venture in note 32.2 of the consolidated financial statements.

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Corporate governance Financial statements Other information

AGM: Annual General Meeting.

Alfa: The Group or Alfa Financial

SoftwareHoldings PLC and its

subsidiaryundertakings (as defined

bytheCompanies Act 2006).

API: Application Programming Interface.

APM: Alternative Performance Measure.

Articles: The Articles of Association

oftheCompany.

Banks: Customers classified as banking

institutions are finance entities associated

with regulated banking groups.

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.

CEO: Chief Executive Officer.

CFO: Chief Financial Officer.

CGU: Cash-generating unit.

CLT: Company Leadership Team.

Companies Act: The Companies Act 2006

(as amended).

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.

CODM: Chief Operating Decision Maker.

COO: Chief Operating Officer.

CSR: Corporate Social Responsibility.

Customer concentration: The proportion

ofgroup revenues made up by the top 5 or

top 10 customers, in each relevant period

asstated.

DBSP: Deferred Bonus Share Plan.

Directors: The Directors of the Company

whose names are set out on pages 74 to 75.

Disclosure and Transparency Rules: The

Disclosure and Transparency Rules made

under Part VI of the Financial Services

andMarkets Act 2000 (as amended).

EMEA: Europe, the Middle East and Africa.

ESG: Environmental, Social

andGovernance.

EPS: Earnings per share.

EU: European Union.

EURIBOR: the Euro Interbank Offer Rate.

FCA: Financial Conduct Authority

FCF: Free cash flow.

FRC: The Financial Reporting Council.

FTE: Full time equivalent.

FVOCI: Fair value through other

comprehensive income.

FVTPL: Fair value through profit or loss.

GHG: Greenhouse gases.

Group: Alfa Financial Software Holdings

PLC and its subsidiaries.

HMRC: Her Majesty’s Revenue & Customs.

KPI: Key performance indicator.

IP: Intellectual property.

IRT: Incident Response Team.

LIBOR: London Inter-bank Offered Rate.

LTIP: Long-Term Incentive Plan.

ML: Machine Learning.

OEMs: Original equipment and

automotivemanufacturers.

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.

Operating free cash flow conversion

represents Operating free cash flow

generated as a proportion of

Operatingprofit.

PDMR: Person Discharging Managerial

Responsibilities.

PDP: Performance Development Plan.

R&PD: Research and product development.

RFI: Request for information.

SDG: Sustainable Development Goals.

SECR: Streamlined Energy and

CarbonReporting.

SG&A: Sales, general and

administrativeexpenses.

SI: Systems integrator.

SONIA: Sterling Overnight Index Average.

The effective overnight interest rate paid by

banks for unsecured transactions in the

British sterling market.

STFR: Single total figure of remuneration.

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.

Glossary of terms

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

182

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

ISIN: GB00BDHXPG30

LEI: 213800C5UOZHUTNUGA28

Investor relations

ir@alfasystems.com

Media relations

Teneo

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 0371 384 2030 and outside the UK +44 (0)121 415 7047

Online: help.shareview.co.uk (from here, you will be able to securely

email Equiniti with your enquiry.)

Shareholder information

183

Strategic report

Corporate governance Financial statements Other information

This report is printed on 100% recycled

paper, which is certified carbon balanced

byWorld Land Trust Ltd.

Blackdog Digital is a carbon neutral

company and is committed to all round

excellence and improved environmental

performance is an important part of our

‘GoGreen’ strategy.

Luminous are certified in using Carbon

Balanced paper for the Alfa Financial

Software Holdings PLC Annual Report. This

project has balanced through World Land

Trust the equivalent of 210kg of Carbon

Dioxide. This support will enable World

Land Trust to protect 40m

of critically

threatened tropical forest.

CBP011490

Alfa Financial Software Holdings PLC Annual Report and Accounts 2022

184

Consultancy, design and production

www.luminous.co.uk

Design and production

www.luminous.co.uk

Moor Place

1 Fore Street Avenue

London EC2Y 9DT

+44 (0)20 7588 1800