Andrew Denton (pictured above), chief executive officer at Alfa, confirmed that although 2020 had been a volatile year from an economic and societal perspective, “the resilience and strength of our people and their consistent delivery to our customers has remained constant throughout the year – and has been largely unaffected by the events around us”.

He told Asset Finance International: “The underlying asset finance market tends to be relatively resilient in economic downturns, because it is a more secure form of lending meaning its share of the overall finance market tends to increase.”

He explained that the year started with some encouraging signs from new contract announcements, but was then overshadowed by the impact of the Covid-19 pandemic. “As part of our strong risk management processes,” he said, “we implemented working from home for all employees in early March in advance of government-imposed lockdowns.

“The switch to remote working was accomplished smoothly and without disruption across all of our offices, reflecting the investments we had made in our infrastructure, the flexibility of our systems and the dedication of our people.”

Denton stressed that the company engaged with its customers throughout the year to ensure it understood how the pandemic was impacting their ongoing business and, where relevant, their plans for implementing and developing Alfa Systems.

He said: “In the early stages of the crisis there was inevitably a lot of uncertainty around these plans, including the cancellation of a newly won contract with a US auto customer. Whilst we were cautious about the short-term outlook for the business, we remained confident in our medium- to long-term outlook and so continued with our plans to grow the business, recruit into our client-facing teams, and invest in our technology.”

Medium-term resilience

Towards the end of Q2 and into Q3 Alfa saw customers recommit to plans and a number of customers look to upgrade from Alfa Version 4 to Version 5. It also saw an increase in interest from potential new customers. This was triggered in part by remote working highlighting the need for a digital technology.

Customarily, Alfa raises some 60% of its revenues from EMEA (including the UK), 37% from the Americas and 3% from the rest of the world.

“We saw greater resilience in the US than the UK and Europe although there were reductions in new lending in all regions in the first half of the year, but with significant improvements in the second half.”

Denton explained that the medium-term resilience in the auto and equipment finance markets means that in the related software market, big system projects that are underway tend not to get stopped, although projects can look to save money in the short term which can change plans.

He added: “We do however expect that the pandemic is accelerating opportunities from those businesses that have found that their systems have not been flexible enough to cope with remote working, changes in regulation, and the need quickly to reschedule payments. These organisations are now looking to digital technologies to improve operational efficiencies and transform their business.”

Good flow of pipeline development

An integral part of Alfa’s success in 2020 was the pipeline development in its core markets of US Auto, US Equipment, European multinational and the UK. Denton stressed that continuing to be successful in these core markets reduces new-customer development efforts and allows the speedier implementation of systems projects.

He said: “During the first half of 2020 we saw a reduction in our early- and mid-stage pipeline, partly as a result of good progress of opportunities into the later stage of the pipeline – but also because of an absence of lead activity which we believe was a result of the impact of Covid-19 on customers’ appetite for initiating large new systems projects.

“The second half of 2020 saw a return of new prospects and we see the early-stage pipeline largely back to the levels of the previous year end.”

Alfa Start accelerates growth

During 2020 the company launched Alfa Start the Cloud Hosted entry level version of the Alfa Systems platform. It uses a predefined, leading practice configuration and process catalogue which allows any finance company to take full advantage of the proven Alfa Systems platform, which until now has only been within the reach of larger, more established operators.

This optimised approach accelerates systems change, maximises value and minimises risk, and enables lean businesses to automate and innovate. Alfa Start customers can be in live production with their new system in less than 20 weeks, quickly leveraging Alfa's functionality and performance. It can also be used as an accelerator for all implementations, cutting the time to get even large scale customers live using a Minimum Viable Product approach.

Denton explained: “In the first half of 2020 we successfully went live with an Alfa Start implementation for Hampshire Trust Bank in the UK, delivering within 19 weeks.

“We have continued to refine the Alfa Start package, and during the year, Alfa Start was formally launched for the US Auto Finance sector, where we are building on our long-established experience of working with market leading companies in that market.

In October Alfa announced that it had achieved a successful go-live for a US automotive manufacturer - its first Alfa Start for a US auto customer, in under 23 weeks. “We have an

implementation underway for another UK Equipment customer, due to go-live in Q1 2021,” he added.

Cloud Hosting of growing importance

Cloud Hosting is becoming an increasingly important part of Alfa’s business. Denton explained: “It not only provides a predictable, accretive revenue stream for us and a great service for our customers, but also allows us to provide environments quickly to enable projects to get started.

“During the year we announced four new contract wins for our Cloud Hosting solution. These were with a major South African bank to support a multi-phase implementation, a leading UK provider of auto finance solutions and two UK equipment finance companies.

“One of the UK Equipment finance companies was an existing customer that is upgrading from Version 4 to Version 5 as well as moving to our Cloud Hosting solution.”

Alfa now hosts a total of 10 customers. Two of these are in pre-implementation, four are in implementation projects, and four are in live production. Monthly revenues grew from £0.1m per month in January 2020 to £0.4m per month by the end of the year.

Artificial Intelligence innovation through Alfa iQ

In May 2020 the company formed Alfa iQ, a 51:49 joint venture (JV) between Alfa and Bitfount, a company founded by Blaise Thomson.

During 2021 Alfa iQ plans to build a decision support architecture that is tightly integrated with business process automation tooling and includes real-time, intelligent proactive and reactive decision making as well as informed strategic decision making.

Denton said: “This JV is at an early stage and is aiming to impact revenues in 2022.”

A cautiously optimistic outlook for 2021

With such encouraging results for 2020, a year that by common consent was essentially downbeat in the asset finance industry Denton is understandably cautiously optimistic regarding the future.

He said: “During 2020 we have started to build real momentum in the business despite the impacts of the pandemic. We have continued to develop our product, we have recruited more implementers and engineers, we have successfully delivered five Go-Lives, and we have started to get real traction with our Cloud Hosted solution.

“This combined with a cash generative business model and a very strong balance sheet means that we have the structures and resources in place that would enable us to see further revenue growth in 2021 if the pipeline converts.”

The nature of Alfa’s current business model is that whilst it has good visibility for the next six months, contractual cover reduces thereafter and so, whilst positive about its prospects, in the current environment Denton remains cautious in setting expectations.

“Consequently,” he added, “we currently expect 2021 revenues to be in line with 2020 underlying revenues on a constant currency basis. We will continue to invest for the future by growing our team further to enable us to convert our sizeable late stage pipeline. In addition profitability will be further impacted as some travel and marketing expenses rebuild as lockdowns ease.”

He concluded confidently: “We continue to believe in our strategy of attracting the best people and investing in our product to support our long term ambitions.”