Fresh from an initial public offering (IPO) on the London Stock Exchange, asset finance technology provider Alfa is predicting a strong opportunity for both itself and the industry in general. Andrew Denton, Alfa’s chief executive officer, talks about what the IPO means for the business and what opportunities lie ahead for it
Floating a business on the stock market can often be seen as a litmus test for governance and viability. Doing so opens up a company’s internal working to potential investor eyes like nothing else.
It was a mark of confidence that Alfa’s listing in June went relatively smoothly, valuing the company at over £800m, in one of the largest UK tech listing for years.
The listing also provided Alfa with a number of advantages. For a start, Denton says listing gave the company a basis for recognising its talent, opening different potential rewards for staff. It also helped Alfa bring in a non-executive board of directors who would be able to help the business.
Denton says the flotation gave Alfa’s customers and prospective customers clarity on its future. “Floating is about creating a platform for the business,” says Denton. And with Alfa growing aggressively, creating this platform was the right thing to do, he says.
The listing came at an interesting time. Following several years of growth across the industry, some questions have been asked about the quality of underwriting in motor finance, while wider economic trends – partly thanks to Brexit – have caused some commentators to speculate that growth may soon slow across the market.
But for systems providers like Alfa, there is still plenty room to grow, and Denton notes Alfa currently captures around 2% of the $3bn spent on systems from across the market, as one of the leaders in the industry.
Denton is optimistic about the long-term prospects for the industry, noting: “What we are providing is a solution largely based on knowledge of the asset, and I think that is one reason why it is a very resilient industry.”
There have been comments around how wider economic issues might affect asset finance, however in the long run Denton is bullish about the industry’s potential: “People get hung up with issues they can get their head round, like what the debt market looks like, and macro trends with respect to people’s propensity to pay money back, and what the economic indicators look like.
“But if you want to talk macros, the more macro trend is leasing, asset finance and motor finance fit in really nicely with the sharing economy.”
The industry is not without its challenges. Lessors who have organised themselves down various verticals – for example a company with a short-term beer barrel rental business, a seasonal yellow plant agricultural machines lessor, and a separate rental organisation may find themselves needing to change their structures in the future, he says.
Denton says: “You are going to start to go towards a world where people’s asset finance products are under one roof, and what they are looking to do is provide a solution under which someone can use an asset, and the products, the innovation inside that are part of that solution.”
For motor finance lenders especially, another challenge they will need to deal with is the pace of innovation from players entering the industry.
Denton observes: “If you do not have the capabilities or the wish to innovate, then when the guy down the street is offering lifestyle products and you are still offering a vanilla HP, you are going to be in a different place.”
More generally, customers are becoming more demanding says Denton. Consumers are increasingly expecting omni-channel services, and more general people and companies are expecting strong digital solutions.
Denton is clear that digital means more than taking a point of sale and putting it on the web. Digital means companies giving their customers a service or product line that was simply not feasible before digital. An example would be self-service and machine learning systems, and understanding a customer’s behaviour, to tailor something specifically for them as part of that digital landscape.
For Alfa itself, now the IPO is out of the way, Denton says the company will focus on improving the user experience of the software, adding that the aim is to grow within its existing model.
Doing so will involve growing Alfa’s headcount – currently at 300 people. These people come from a variety of backgrounds, and Denton concludes: “We are an incredibly diverse company, and we do not just bring in computer scientists, but people with a wide skill-set who can add to the business.”