AFH Financial Group Plc Trading Update (9088G)

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RNS Number : 9088G

AFH Financial Group Plc

12 November 2018

12 November 2018

AFH FINANCIAL GROUP PLC

("AFH" or the "Company")

TRADING UPDATE

The Board of AFH, a leading financial planning led wealth management firm, is pleased to provide the following update on trading for the twelve months ended 31 October 2018.

Financial highlights

   --     Another year of strong growth 

-- Revenues for the year expected to exceed GBP50m, up 49% (2017: GBP33.6m), driven by integration of acquisitions made during the year, continuing progress of previous acquisitions and higher average levels of revenue generated by existing advisers

   --     Continued expansion of EBITDA margin, reflecting operational gearing 
   --     Funds under Management reached GBP4.5bn in October 2018 (2017: GBP2.8bn) 
   --     Trading for the full year in line with current market expectations 

-- Board remains confident of the Company's prospects and achieving its stated objectives of revenues of GBP75m, underlying* EBITDA margin of 20% and GBP5bn Funds under Management.

* Underlying excludes amortisation of intangible assets arising on business combinations and the non-cash charge/credit for share based payment costs

Confidence in strategy and outlook

   --     16 acquisitions completed during the year, total anticipated consideration of GBP34m 

-- Prior and current year acquisition integrations in line with expectations and deferred earn outs continue to be paid at over 90% of target

   --     AFH is well positioned to continue to take advantage of ongoing IFA market consolidation 
   --     Strong pipeline of potential acquisitions currently under negotiation 

-- Cash balances at 31 October 2018 of GBP22m, following successful institutional placings of GBP17.5m in December 2017 and GBP15m in October 2018

During the last twelve months, the Company has enjoyed strong organic growth, with a significant increase in its recurring fee income, and has completed the acquisition of 16 businesses, extending both the Company's size and geographical footprint. Total revenues for the full year are expected to reach GBP50m (2017: GBP33.6m), a 49% increase year on year, of which approximately GBP4m was generated by acquisitions completed during the year.

The organic business continues to provide the basis for significant growth. Of the expected total revenue of GBP50m for the year, GBP20m was generated organically as new business. In addition to the funds of acquired businesses, over GBP450m of gross funds was received from new and existing clients, representing year on year growth of 16%.

The results will confirm the Company's ability to successfully integrate acquisitions. During the year the Company paid over GBP3.58m in deferred earn out consideration in respect of acquisitions from prior years, at an average level above 90% of the price negotiated for those acquisitions. This reflects the strong performance of the acquired businesses within AFH and proven track record of successful acquisitions.

During the year, the Company raised GBP32.5m through two placings that introduced a number of new institutional investors and were well supported by existing shareholders. Over 90% of the funds raised in the December 2017 placing were used to make new acquisitions during the year which are expected to drive future earnings per share.

The Board remains confident of the prospects for further profitable expansion, both from organic growth generated through AFH's existing advisers, and from further acquisitions.

On 2 November 2018, following the year end, the Company announced the acquisition of Premier Wealth Management Harrogate Limited for a maximum consideration of GBP4.5m. Following the successful GBP15m October placing, the Company is well positioned to execute on its healthy pipeline of prospective acquisitions.

Commenting, Alan Hudson, Chief Executive of AFH, said:

"I am encouraged by the exceptional progress we have made in 2018 towards the realisation of the revenue, profitability and Funds under Management targets that we set ourselves. The ability to grow revenues by 49% whilst continuing to expand our EBITDA margin reflects the success of the Company's strategy.

During the year we have completed on 16 acquisitions whilst remaining focussed on ensuring shareholder value by executing acquisitions that are earnings accretive. The success and robustness of our acquisition model is reflected in the continued high level of acquisitions meeting earn out targets and the strong cash flow generated by the business to finance these earn out payments.

I believe that shared values are critical in creating successful acquisitions that bind both advisers and clients to the AFH group and am pleased at the high level of advisers who remain with AFH many years after their earn out has been completed.

AFH has continued to attract new funds throughout the year and I am pleased to report double digit organic growth in our Funds under Management, which now exceed GBP4.5bn.

The support of new and existing institutional shareholders throughout the year has provided the Company with the funds to continue to acquire a number of earnings accretive IFA businesses, whilst expanding our national footprint at a time when the requirement for financial planning and personal asset management continues to grow. Our fundraising in October, against the backdrop of difficult equity markets, has enabled us to continue to evaluate several attractive future acquisition opportunities.

The Board will continue to execute its strategy of making selective acquisitions and increasing AFH's national footprint whilst providing a professional and cost effective service to our clients. The Board believes that AFH remains well positioned to take advantage of opportunities as they arise.

I look forward to updating the market further in January 2018, at the time of our results. We would like to thank our shareholders, advisers and staff, without whom we would not be reporting this level of profitable expansion."

Enquiries:

AFH Financial Group PLC 01527 577 775

Alan Hudson, Chief Executive Officer

Paul Wright, Chief Financial Officer

www.afhfinancialgroup.com

Liberum (Nominated Adviser and Broker) 020 3100 2000

John Fishley/Richard Bootle /Euan Brown

This announcement is released by AFH Financial Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Paul Wright, Chief Financial Officer.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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November 12, 2018 02:00 ET (07:00 GMT)