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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Afh Financial Group Plc | LSE:AFHP | London | Ordinary Share | GB00B4W5WQ08 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 475.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAFHP
RNS Number : 5402C
AFH Financial Group Plc
29 June 2016
29 June 2016
AFH Financial Group PLC ("AFH" or the "Company")
Results for the six months ended 30 April 2016
AFH reports further strong growth
AFH, the rapidly growing wealth management and financial advisory business, is pleased to announce its results for the six months ended 30 April 2016.
Strong growth
-- Revenues up 42% to GBP11.7 million (H1 2015: GBP8.22 million) -- Gross margin maintained at 55% (H1 2015: 55%) -- Recurring revenue as a percentage of total revenue maintained at 66% (H1 2015: 66%) -- EBITDA up 43% to GBP1.43 million (H1 2015: GBP1.0 million) -- Profit before tax up 42% to GBP0.86 million (H1 2015: GBP0.6 million) -- Earnings per share up 35% to 2.9 pence (H1 2015: 2.15 pence) -- Funds under Management of GBP1.88 billion, up 44% (30 April 2015: GBP1.3 billion)
Proven integration platform
-- Over 90% of deferred consideration for those acquisitions reaching a deferred consideration milestone was earned and paid during the period
Confident Outlook
-- Strong balance sheet to support further acquisitions -- Cash reserves of GBP7.1 million (30 April 2015: GBP4.3 million) -- Regulatory dynamics support further industry consolidation -- Disciplined acquisition methodology -- Strong pipeline of acquisition opportunities
Alan Hudson, Group Chief Executive, commented:
"Our strong first half results demonstrate AFH's continued successful momentum. Strong organic growth, complemented by contributions from our acquisitions, drove increased earnings per share by almost a third, compared with the same period last year. Within this, the rise in both recurring fees and revenue per adviser was particularly encouraging as we continue to realise and develop the benefits of a strongly integrated business model under the AFH brand.
Based on the continued client demand for our financial planning led wealth management services, the opportunities following UK pension reform and our proven track record as a successful acquirer and integrator of businesses, we are confident of the Group's future prospects for the full year and beyond."
Enquiries: AFH Financial Group PLC Alan Hudson, Chief Executive Officer Paul Wright, Chief Financial Officer 01527 577775 Liberum (Nominated Adviser and Broker) John Fishley / Tom Fyson 020 3100 2000 Camarco Geoffrey Pelham-Lane / Jennifer Renwick 0203 757 4985
Chief Executive's Review
Trading results
I am pleased to provide shareholders with an update on the Company's performance for the six months to 30 April 2016.
The business has seen significant growth over the period, with revenue for the period increasing to GBP11.7m (H1 2015: GBP8.22m), driven by ongoing recurring fees which increased by 44% and which represented 66% of total revenue during the period (H1 2015: 66%).
Within the total revenue of GBP11.7m, GBP1.9m (representing 16%) was generated by portfolios acquired in the financial year ended 31 October 2015.
Whilst adviser numbers remained constant during the period, annualised revenue per adviser increased to GBP156,000 (H1 2015 GBP120,000).
Gross margins remained strong at 55% (H1 2015: 55%) and the Group reported EBITDA of GBP1.4m, an increase of 27% over the same period last year (GBP1.1m).
EBITDA increased by 43% to GBP1.43m representing a margin on Revenue of 12.2% (H1 2015: 12.2%).
The Group reported an increase of 42% in profit before tax to GBP0.86m, whilst earnings per share increased to 2.9p per share (2015: 2.15p).
In a period of stock market turbulence, our clients' portfolios demonstrated a strong resilience to market volatility and, as a consequence, the Company's management fees, which are based on the value of our Funds under Management ("FUM"), were similarly cushioned. Recurring revenue on which the Company earns these fees is estimated to rise or fall by approximately 4% for every 10% movement in the FTSE 100 index. The negative impact on current period revenues compared to H1 2015 was approximately GBP30,000.
Since April 2015 the Company has continued to invest in its head office to support the current and future projected growth. Whilst the increased cost was incurred in the second half of 2015 alongside the acquisitions made last year, on a like for like basis administrative expenditure increased by 40% to GBP5.38m whilst remaining at a similar level to H2 in 2015. This increase included a rise of GBP123,000 (37%) in amortization and depreciation costs of noncurrent assets acquired. Further investment is anticipated as the Group continues its growth strategy.
During the period GBP125m (gross) of new funds were invested through AFH from existing and new clients.
Cash position
The Group remains free of bank or, with the exception of a small property mortgage, secured debt and maintains healthy cash balances. At the period-end, cash and cash equivalents totalled GBP7.1m. Unsecured non-convertible bonds of GBP0.75m and GBP2.14m mature in 2020 and 2018 respectively.
Business review
In December 2015 the Company raised GBP6.1m (net) from institutional and existing investors to fund the acquisition of complementary IFA companies and the working capital requirements of the enlarged organisation. The Company is currently undertaking formal due diligence on certain potential acquisitions which are expected to conclude and be announced to the market during the second half of the year.
The last twelve months have seen a number of large M&A transactions in the wealth management sector completed at multiples well in excess of historic valuations, as wealth managers seek greater distribution and economies of scale. Whilst AFH has developed a strong pipeline of targets it remains the policy of the Board only to acquire businesses that: i) will be value enhancing for shareholders; ii) reflect the culture of the Company; and iii) can be integrated seamlessly into the AFH business. Whilst the number of acquisitions in the current year is unlikely to match the 11 transactions in 2015 this selective policy is believed by the board to be in the long term interest of all shareholders.
The successful integration and subsequent performance of our acquisitions remains a key driver for the Company and we continue to invest in our integration processes. I am pleased to report that our continued focus on post-acquisition integration and the development of those financial advisers joining the Company through acquisitions has resulted in over 90% of deferred consideration for those acquisitions reaching a deferred consideration milestone being earned and paid during the period. This is a result of the targets set out in purchase agreements being substantially met and demonstrates that clients are not only being retained, but the businesses acquired are continuing to grow as part of AFH.
As previously noted, the Company has built a strong pipeline of acquisition targets throughout the UK. The Board recognises the strength of AFH in its traditional West Midlands heartland and is seeking to continue to build on this position whilst expanding into areas where both advisers and clients can be effectively supported. Acquisitions made in Scotland and the South of England in 2015 have been successfully integrated into the business and the pipeline reflects our desire to develop these areas in the future. Whilst AFH has a strategy of continuing to increase the average size of our acquisitions, the Company also remains committed to providing an exit for retiring IFAs where our existing advisers can offer the full AFH service to the acquired client base. As a result the Board expects to announce both strategic and tactical acquisitions in the future.
Outlook
The Group remains profitable and cash generative with a strong balance sheet. Our strategy remains to expand nationally in our traditional areas of strength, through both organic and acquisitive growth to drive increased profitability. The Directors continue to actively seek appropriately priced acquisition opportunities with a comparable culture to AFH to generate value for shareholders.
Our aim is to grow our client base through increasing our adviser numbers and greater productivity afforded by the enlarged AFH structure and centralised support functions. The progress made during the first half of the current financial year, combined with the growth dynamics of our market, allow the Directors to view the prospects for the full year and beyond with confidence.
Alan Hudson
Chief Executive
29 June 2016
Consolidated Statement of Comprehensive Income
Hot Features
Premium
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2015 2015
Note GBP'000 GBP'000 GBP'000
Revenue 3 11,700 8,222 20,977
Cost of sales (5,316) (3,730) (10,009)
-------------- -------------- --------------
Gross profit 6,384 4,492 10,968
Administrative expenses (5,415) (3,827) (9,213)
-------------- -------------- --------------
Operating profit 969 665 1,755
Amortisation and
Depreciation 459 336 872
EBITDA 1,428 1,001 2,627
------------------------- ----- ---------------- --------------- ---------------
Finance income 15 15 26
Finance costs (125) (73) (187)
-------------- -------------- --------------
Profit before tax 859 607 1,594
Income tax expense (200) (189) (421)
-------------- -------------- --------------
Profit for the year
attributable to
owners of the parent 659 418 1,173
Other comprehensive - - -
income
-------------- -------------- --------------
Total comprehensive
income for the year
attributable to
owners of the parent 659 418 1,173
Earnings per share
(in pence) 7
Basic 2.90 2.15 5.95
Diluted 2.68 2.00 5.49
Adjusted earnings
per share (in pence) 7
Basic 4.84 3.85 10.26
Diluted 4.46 3.59 9.48
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30 April 30 April 31 October
2016 2015 2015
Note GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 4 20,530 18,967 20,902
Property, plant and
equipment 1,098 250 960
Investments 1 1 1
-------------- -------------- --------------
21,629 19,218 21,863
Current assets
Trade and other receivables 4,546 2,411 4,406
Current tax assets - - -
Cash and cash equivalents 7,106 4,326 3,766
-------------- -------------- --------------
11,652 6,737 8,172
-------------- -------------- --------------
Total assets 33,281 25,955 30,035
Liabilities
Current liabilities
Trade and other payables 6 7,911 7,841 8,289
Current tax liabilities 299 39 339
Financial liabilities
- Borrowings 5 63 - 63
-------------- -------------- --------------
8,273 7,880 8,691
Net current assets
/ (liabilities) 3,379 (1,143) (519)
-------------- -------------- --------------
Non-current liabilities
Trade and other payables 6 2,530 3,865 5,238
Financial liabilities
- Borrowings 5 3,398 2,894 3,432
Deferred tax liability - 42 45
-------------- -------------- --------------
5,928 6,801 8,715
Total liabilities 14,201 14,681 17,406
-------------- -------------- --------------
Net assets 19,080 11,274 12,629
Shareholders' equity
Share capital 2,409 1,950 2,012
Share premium account 13,976 7,337 8,112
Merger reserve (540) (540) (540)
Share-based payment
reserve 456 329 384
Retained earnings 2,779 2,198 2,661
-------------- -------------- --------------
Total Shareholders'
equity 19,080 11,274 12,629
Share Share Merger Share-based Retained Total
capital premium reserve payment earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Audited balance
at 31 October
2014 1,932 7,097 (540) 269 1,780 10,538
------------ ------------ ------------ ------------ ------------ ------------
Profit for
the period - - - 60 418 478
Other comprehensive
income - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total comprehensive
income - - - 60 418 478
------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 18 240 - - - 258
Dividend - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Unaudited balance
at 30 April
2015 1,950 7,337 (540) 329 2,198 11,274
------------ ------------ ------------ ------------ ------------ ------------
Profit for
the period 55 755 810
Other comprehensive
income
------------ ------------ ------------ ------------ ------------ ------------
Total comprehensive
income 55 755 810
------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 62 775 837
Dividend (292) (292)
------------ ------------ ------------ ------------ ------------ ------------
Audited balance
at 31 October
2015 2,012 8,112 (540) 384 2,661 12,629
------------ ------------ ------------ ------------ ------------ ------------
Profit for
the period - - - 72 659 731
Other comprehensive
income - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total comprehensive
income - - - 72 659 731
------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 397 5,864 - - - 6,261
Dividend - - - - (541) (541)
------------ ------------ ------------ ------------ ------------ ------------
Unaudited balance
at 30 April
2016 2,409 13,976 (540) 456 2,779 19,080
------------ ------------ ------------ ------------ ------------ ------------
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2015 2015
Note GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from
operations 8 916 993 2,231
Tax paid (240) (286) (219)
-------------- -------------- --------------
Net cash inflow from
operating activities 676 707 2,012
-------------- -------------- --------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (225) (18) (789)
Purchase of other intangible
assets, net of cash (2,611) (4,388) (6,532)
Proceeds from disposals
of other intangible
assets - 34 34
Rental Income received - 4 8
Interest received 15 11 18
-------------- -------------- --------------
Net cash (outflow) from
investing activities (2,821) (4,357) (7,261)
-------------- -------------- --------------
Cash flows from financing
activities
Proceeds from issue
of shares 6,405 211 1,072
Share issue costs (223) - (24)
Issue of unsecured bond - 2,142 2,142
Proceeds from borrowings - - 601
Repayment of borrowings (34) - -
Interest paid (122) (30) (137)
Dividends (541) - (292)
-------------- -------------- --------------
Net cash inflow/(outflow)
from financing activities 5,485 2,323 3,362
-------------- -------------- --------------
Net increase / (decrease)
in cash and cash equivalents 3,340 (1,327) (1,887)
Cash and cash equivalents
at the beginning of
the period 3,766 5,653 5,653
-------------- -------------- --------------
Cash and cash equivalents
at the end of the period 7,106 4,326 3,766
Notes to the Consolidated Financial Statements
1 General Information
AFH Financial Group Plc is a company incorporated in England and Wales. The Group is principally engaged in the provision of independent financial advice to the retail market.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's financial statements for the year ended 31 October 2015, which were prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union, and in accordance with the requirements of the Companies Act applicable to companies reporting under IFRS.
The information relating to the six months ended 30 April 2016 and the six months ended 30 April 2015 is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 October 2015 have been reported on by its auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified and did not draw attention to any matters by way of emphasis, or contain a statement under section 498(2) or (3) of the Companies Act 2006.
2.2 Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 October 2015.
2.3 Basis of consolidation
The interim condensed consolidated financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 30 April each year.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
2.4 Key sources of judgements and estimation uncertainty
The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgement at the date of preparation of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The areas where a higher degree of judgement or complexity arises, or where assumptions and estimates are significant to the consolidated financial statements, are discussed below.
Impairment of client portfolios
The Group reviews whether acquired client portfolios are impaired at least on an annual basis. This comprises an estimation of the fair value less cost to sell and the value in use of the acquired client portfolios. In assessing value in use, the estimated future cash flows expected to arise from the individual client portfolios are discounted to their present value over a finite period to calculate the fair value.
The key assumptions used in arriving at a fair value less cost of sale are those around valuations based on multiples of future earnings streams and values based on assets under management. These have been determined by looking at valuations of similar businesses and the consideration paid in comparable transactions.
The carrying amount of client portfolios at 30 April 2016 was GBP18.3m (2015: GBP16.9m). No impairments have been made during the period (2015: GBP2.5m).
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. In assessing value in use, the estimated future cash flows expected to arise from the cash-generating unit are discounted to their present value using the Group's weighted average cost of capital adjusted for tax.
The carrying amount of goodwill at 30 April 2016 was GBP2.1m (2015: GBP2.1m). No impairments have been made during the period (2015: GBP nil).
3 Segmental Analysis
The Board of Directors is considered to be the chief operating decision maker of the Group.
The Board has determined that there is one operating segment based on reports reviewed by the Board that are used to make strategic decisions.
The total revenue of the group for the year has been derived from its principal activity wholly undertaken in the United Kingdom.
4 Intangible Assets
Acquired
client
Goodwill portfolios Total
GBP'000 GBP'000 GBP'000
Cost
At 31 October 2014 2,465 8,102 10,567
Additions - 9,583 9,583
Disposals - - -
Revaluations - - -
At 30 April 2015 2,465 17,685 20,150
Additions - 2,376 2,376
Disposals - - -
Revaluations - - -
At 31 October 2015 2,465 20,061 22,526
Additions - - -
Disposals - - -
Revaluations - - -
At 30 April 2015 2,465 20,061 22,526
Amortisation
At 31 October 2014 375 485 860
Charge for the period - 288 288
At 30 April 2015 375 773 1,148
Charge for the period - 476 476
At 31 October 2015 375 1,249 1,624
Charge for the period - 372 372
At 30 April 2016 375 1,621 1,996
Net book value
At 30 April 2016 2,090 18,440 20,530
At 31 October 2015 2,090 18,812 20,902
At 30 April 2015 2,090 16,878 18,968
At 31 October 2014 2,090 7,617 9,707
5 Analysis of borrowings
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2015 2015
GBP'000 GBP'000 GBP'000
Current borrowings
Mortgage on freehold
property 63 - 63
-------------- -------------- --------------
63 - 63
Non-current borrowings
8% Unsecured bonds 752 752 752
7.5% Unsecured bonds 2,142 2,142 2,142
Mortgage on freehold
property 504 - 538
-------------- -------------- --------------
3,398 3,432 3,432
The financial liabilities are recognised at amortised cost. There is no material difference between the fair value and the carrying value.
The 8% unsecured bond is due in 2020. The 7.5% Unsecured bond, issued in December 2014 is due in December 2018.
The mortgage taken out in the year is repayable by instalments over an 8 year period with an interest rate of 2.9% over LIBOR.
6. Trade and other payables
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2015 2015
GBP'000 GBP'000 GBP'000
Current
Trade payables 509 451 850
Contingent consideration 3,891 5,283 4,321
Commissions payable 3,018 1,727 2,488
Other payables 317 224 584
Accruals 176 156 46
-------------- -------------- --------------
7,911 7,841 8,289
Non-current
Contingent consideration 2,530 3,865 5,238
7 Earnings per share
The calculation of earnings per share is based on the profit attributable to the equity holders for the period of GBP659,000 (2015 - GBP418,000) and weighted average number of shares in issue during the period of 22,726,615 (2015 - 19,397,462).
The diluted earnings per share has been adjusted for the potential share issue relating to the share-based payments. The number of shares has been increased by the difference between the amount of shares that will be issued if all options are exercised and the number of shares that could be purchased for the same consideration at average market price.
Adjusted earnings per share of GBP1,101,000 (2015 - GBP746,000) have been calculated on the profit attributable to the equity holders for the period after adding back Amortisation and Depreciation and adjusting the tax provision accordingly.
8 Reconciliation of Operating profit to Net Cash inflow from Operating Activities
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2015 2015
GBP'000 GBP'000 GBP'000
Profit before tax for
the period 859 607 1,594
Adjustments for
Interest and other investment
income (15) (15) (26)
Interest expense 125 73 187
Depreciation, amortisation
and impairment 459 336 872
Equity settled share
based expense 72 60 116
Movements in working
capital
Decrease / (Increase)
in trade and other receivables (140) 63 (1,932)
(Decrease) / Increase
in trade and other payables (444) (131) 1,420
-------------- -------------- --------------
Cash generated from operations 916 993 2,231
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SEFFIAFMSEFM
(END) Dow Jones Newswires
June 29, 2016 02:00 ET (06:00 GMT)
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