TIDMAFHP TIDMAFHB
RNS Number : 0881H
AFH Financial Group Plc
05 June 2017
5 June 2017
AFH Financial Group PLC ("AFH" or the "Company")
Results for the six months ended 30 April 2017
AFH reports further strong growth
AFH, a leading financial planning led wealth management firm, is
pleased to announce its results for the six months ended 30 April
2017.
Strong growth
-- Revenues up 19% to GBP13.9 million (H1 2016: GBP11.7 million)
-- Gross margin increased to 56% (H1 2016: 55%)
-- Recurring revenue as a percentage of total revenue increased
to 70% (H1 2016: 66%, FY2016 68%)
-- Underlying EBITDA* up 35% to GBP2.03 million (H1 2015: GBP1.50 million)
-- Underlying EBITDA* margin increased to 14.6% from 12.8%
-- Profit before tax up 34% to GBP1.15 million (H1 2016: GBP0.86 million)
-- Underlying Earnings per share* up 27% to 6.17 pence (H1 2016: 4.84 pence)
-- Funds under Management above GBP2.2bn, up 17% (H1 2016: GBP1.88bn)
Confident Outlook
-- Strong balance sheet to support further acquisitions
-- Cash reserves of GBP12.6 million, following on from
successful GBP10 million placing (30 April 2016: GBP7.1
million)
-- Regulatory dynamics continue to support further industry consolidation
-- Proven acquisition methodology
-- Strong pipeline of acquisition opportunities
*Underlying excludes amortisation of intangible assets arising
on business combinations and the non-cash charge/credit for share
based payment costs.
Alan Hudson, Group Chief Executive, commented:
"I am pleased to report another six month trading period of
increased turnover and trading margins based on organic growth from
new and existing clients leading to a 27% increase in underlying
Earnings per Share. The strategy of the Company continues to be to
generate long term value for shareholders by providing exceptional
value and service to our clients and using our increasing size to
drive down platform and third party administration costs aligned to
an appropriate risk based investment model."
Enquiries:
AFH Financial Group PLC 01527 577775
Alan Hudson, Chief Executive Officer
Paul Wright, Chief Financial Officer
Liberum (Nominated Adviser and Broker) 020 3100 2000
John Fishley / Richard Bootle
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 2017.
The business has seen further organic growth over the period
with profitability increasing at both EBITDA and EPS levels.
Revenue for the period increased to GBP13.9m (H1 2016: GBP11.7m),
driven by ongoing recurring fees which increased by 23% and which
represented 70% of total revenue during the period (H1 2016:
66%).
Revenue from acquisitions reported during the current year
totaled GBP0.5m and represented 4% of total revenue for the
period.
Adviser numbers grew to 154 during the period whilst annualised
revenue per adviser increased to GBP180,000 (H1 2016
GBP156,000).
Gross margins increased to 56% (H1 2016: 55%). The Group
reported underlying EBITDA of GBP2.03m, an increase of 35% over the
same period last year (GBP1.50m).
The Group reported an increase of 34% in profit before tax to
GBP1.15m whilst earnings per share increased to 3.71p per share
(2016: 2.9p). Underlying earnings per share increased to 6.17p per
share (2016: 4.84p)
During the period GBP128m (gross) of new funds were invested
through AFH from existing and new clients.
April fundraising
During the period the Company raised GBP10m gross (GBP9.5m after
expenses) in an institutional fundraising that I am pleased to
report was oversubscribed. The creation of 5.7m new ordinary shares
represented a 23% increase in the issued share capital of the
Company and in addition to introducing a number of new institutions
to the register was supported by existing major institutional
shareholders. The fundraising has provided the financial strength
to complete a number of potential acquisitions during the second
half of the current financial year, the first of which was
announced to the market on 1 June.
Cash position
The Group remains free of bank or secured debt, with the
exception of a small property mortgage, and maintains healthy cash
balances. Following the fundraising that completed in April 2017
cash and cash equivalents at period end totalled GBP12.6m.
Unsecured non-convertible bonds of GBP0.75m and GBP2.14m mature in
2020 and 2018 respectively.
Business review
I am pleased to report another six month trading period of
increased turnover and trading margins based on organic growth from
new and existing clients. New Funds under Management have continued
to be invested at a rate of GBP20m per month. During the period 97%
of these funds were invested on a discretionary basis. Funds under
Management exceeded GBP2.2bn at period end.
Our digital transformation and IT development projects, to which
I referred in my last report have continued to gather pace and
initial phases have been launched internally. The external roll out
will commence during the second half of the year bringing both
operational efficiencies and greater visibility and investment
opportunity to our clients and advisers.
In May, the Company signed a long term contract with Pershing,
the custody and settlement arm of Bank of New York, extending our
six year relationship to provide a secure and cost effective
service to our clients. Financial benefits of this relationship
have already been experienced by our clients whilst our ability to
leverage on the IT spend and vision of Bank of New York is expected
to bring further commercial opportunities in the future.
During the period AFH completed six acquisitions with a combined
capped value of GBP4.5m. Initial consideration of GBP2m was paid
with the balance to be earned during the next two years. The
Company also paid GBP1.5m in deferred consideration on acquisitions
undertaken in 2014 - 2016.
The fundraising described above has provided the Company with
the ability to complete a number of strategic and tactical
acquisitions during the remainder of the year and into 2018.
Following the period under review, the Company recently announced
the acquisition of Parker Sage Independent Financial Advisers
Limited, an IFA providing independent financial advice in Canary
Wharf London and the northern home counties, at a capped
consideration of up to GBP5.6m, of which GBP2.25m was paid on
completion with the balance to be earned under the standard AFH
model. In addition, the Company has also completed the acquisition
of Eunisure Limited, at a capped consideration of GBP4.5m, of which
GBP1.5m was paid in June 2017. The balance will be earned during a
four year period based on a targeted increase in Group
profitability attributable to the core Eunisure business and
introduced financial planning led investment management. AFH is
currently assessing several further acquisitions which are in
various stages of due diligence and negotiation.
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 strategy of the Company continues to be to generate long
term value for shareholders by providing exceptional value and
service to our clients and using our increasing size to drive down
platform and third party administration costs aligned to an
appropriate risk based investment model.
The Group remains profitable and cash generative with a strong
balance sheet. Our strategy remains to expand our distribution
capacity nationally in our traditional areas of strength, through
both organic and acquisitive growth to drive increased
profitability. The recent acquisition of Eunisure significantly
increases our national footprint whilst addressing the segment of
financial protection that has been widely reported as underserved
by the market in recent years. The Directors' believe that the
expansion of our financial planning products and scope is in the
best interests of both our shareholders and clients and the Company
continues to actively seek appropriately priced acquisition
opportunities with a comparable culture to AFH.
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
5 June 2017
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
2017 2016 31 October
2016
Note GBP'000 GBP'000 GBP'000
Revenue 3 13,865 11,700 24,130
Cost of sales (6,055) (5,316) (10,771)
-------------- -------------- --------------
Gross profit 7,810 6,384 13,359
Administrative expenses (6,542) (5,415) (11,121)
-------------- -------------- --------------
Operating profit 1,268 969 2,238
Amortisation and
Depreciation 689 459 1,206
Non cash share based
payments 72 72 144
------------------------- ----- ---------------- --------------- ---------------
Underlying EBITDA 2,029 1,500 3,588
------------------------- ----- ---------------- --------------- ---------------
Finance income 6 15 40
Finance costs (123) (125) (248)
-------------- -------------- --------------
Profit before tax 1,151 859 2,030
Income tax expense (230) (200) (353)
-------------- -------------- --------------
Profit for the year
attributable to
owners of the parent 921 659 1,677
Other comprehensive - -
income
-------------- -------------- --------------
Total comprehensive
income for the year
attributable to
owners of the parent 921 659 1,677
Earnings per share
(in pence) 8
Basic 3.71 2.90 7.16
Diluted 3.38 2.68 6.61
Underlying earnings
per share (in pence) 8
Basic 6.17 4.84 11.76
Diluted 5.61 4.46 10.86
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30 April 30 April 31 October
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 4 25,157 20,530 21,359
Property, plant and
equipment 1,533 1,098 1,202
Investments 1 1 1
Deferred tax asset 43 - 43
-------------- -------------- --------------
26,734 21,629 22,605
Current assets
Trade and other receivables 5,108 4,546 4,465
Current tax assets - - -
Cash and cash equivalents 12,576 7,106 6,717
-------------- -------------- --------------
17,684 11,652 11,182
-------------- -------------- --------------
Total assets 44,418 33,281 33,787
Liabilities
Current liabilities
Trade and other payables 6 7,052 7,911 7,837
Current tax liabilities 445 299 322
Financial liabilities
- Borrowings 5 77 63 76
-------------- -------------- --------------
7,574 8,273 8,235
Net current assets
/ (liabilities) 10,110 3,379 2,947
-------------- -------------- --------------
Non-current liabilities
Trade and other payables 6 2,476 2,530 2,047
Financial liabilities
- Borrowings 5 3,317 3,398 3,352
-------------- -------------- --------------
5,793 5,928 5,399
Total liabilities 13,367 14,201 13,634
-------------- -------------- --------------
Net assets 31,051 19,080 20,153
Shareholders' equity
Share capital 7 3,008 2,409 2,413
Share premium account 7 23,299 13,976 13,989
Merger reserve (540) (540) (540)
Share-based payment
reserve 566 456 494
Retained earnings 4,718 2,779 3,797
-------------- -------------- --------------
Total Shareholders'
equity 31,051 19,080 20,153
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
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
------------ ------------ ------------ ------------ ------------ ------------
Profit for
the period - - - 38 1,018 1.056
Other
comprehensive
income - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income - - - 38 1,018 1,056
------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 4 13 - - - 17
Dividend
------------ ------------ ------------ ------------ ------------ ------------
Audited balance
at 31 October
2016 2,413 13,989 (540) 494 3,797 20,153
------------ ------------ ------------ ------------ ------------ ------------
Profit for
the period - - - 72 921 993
Other
comprehensive
income - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income - - - 72 921 993
------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 595 9,310 - - - 9,905
Dividend
------------ ------------ ------------ ------------ ------------ ------------
Unaudited balance
at 30 April
2017 3,008 23,299 (540) 566 4,718 31,051
------------ ------------ ------------ ------------ ------------ ------------
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from
operations 8 1,455 915 3,278
Tax paid (103) (240) (365)
-------------- -------------- --------------
Net cash inflow from
operating activities 1,352 675 2,913
-------------- -------------- --------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (450) (225) (423)
Purchase of other intangible
assets, net of cash (4,495) (2,611) (4,996)
Interest received 6 15 34
-------------- -------------- --------------
Net cash (outflow) from
investing activities (4,939) (2,821) (5,385)
-------------- -------------- --------------
Cash flows from financing
activities
Proceeds from issue
of shares 10,021 6,405 6,501
Share issue costs (412) (223) (223)
Repayment of borrowings (35) (34) (67)
Interest paid (128) (122) (248)
Dividends - (541) (541)
-------------- -------------- --------------
Net cash inflow/(outflow)
from financing activities 9,446 5,485 5,422
-------------- -------------- --------------
Net increase / (decrease)
in cash and cash equivalents 5,859 3,339 2,950
Cash and cash equivalents
at the beginning of
the period 6,717 3,767 3,767
-------------- -------------- --------------
Cash and cash equivalents
at the end of the period 12,576 7,106 6,717
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
2016, 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 2017
and the six months ended 30 April 2016 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 2016 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 2016.
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 and 31 October 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 2017 was
GBP23.1m (2016: GBP18.4m). No impairments have been made during the
period (2016: nil).
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 2017 was GBP2.1m
(2016: GBP2.1m). No impairments have been made during the period
(2016: 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 2015 2,465 20,061 22,526
Additions - - -
Disposals - - -
Revaluations - - -
At 30 April 2016 2,465 20,061 22,526
Additions - 1,482 1,482
Disposals - - -
Revaluations - - -
At 31 October 2016 2,465 21,543 24,008
Additions 4,368 4,368
Disposals - - -
Revaluations - - -
At 30 April 2017 2,465 25,911 28,376
Amortisation
At 31 October 2015 375 1,249 1,624
Charge for the period - 372 372
At 30 April 2016 375 1,621 1,996
Charge for the period - 653 653
At 31 October 2016 375 2,274 2,649
Charge for the period - 570 570
At 30 April 2017 375 2,844 3,219
Net book value
At 30 April 2017 2,090 23,067 25,157
At 31 October 2016 2,090 19,269 21,359
At 30 April 2016 2,090 18,440 20,530
At 31 October 2015 2,090 18,812 20,902
5 Analysis of borrowings
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2017 2016 2016
GBP'000 GBP'000 GBP'000
Current borrowings
Mortgage on freehold
property 77 63 76
-------------- -------------- --------------
77 63 76
Non-current borrowings
8% Unsecured bonds 752 752 752
7.5% Unsecured bonds 2,142 2,142 2,142
Mortgage on freehold
property 423 504 458
-------------- -------------- --------------
3,317 3,398 3,352
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 is repayable by instalments over an 8 year period,
ending October 2023, 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
2017 2016 2016
GBP'000 GBP'000 GBP'000
Current
Trade payables 948 509 1,090
Contingent consideration 3,039 3,891 3,396
Commissions payable 2,584 3,018 2,593
Other payables 355 317 269
Accruals 126 176 489
-------------- -------------- --------------
7,052 7,911 7,837
Non-current
Contingent consideration 2,476 2,530 2,047
7 Share Capital
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2016 2016
30,082,794 authorised, issued
and fully paid 10p ordinary
shares 3,008 2,409 2,413
On 3 February 2017, 57,057 Ordinary Shares were issued at
GBP1.00 each with GBP0.90 per share transferred to the share
premium account to provide additional working capital.
On 3 February 2017, 5,500 Ordinary Shares were issued at GBP0.37
each with GBP0.27 per share transferred to the share premium
account to provide additional working capital.
On 9 March 2017, 180,639 Ordinary Shares were issued at GBP1.64
each with GBP1.54 per share transferred to the share premium
account to provide additional working capital.
On 20 March 2017, 5,714,285 Ordinary Shares were issued at
GBP1.75 each with GBP1.65 per share transferred to the share
premium account to provide additional working capital.
On 26 April 2017, 2,500 Ordinary Shares were issued at GBP1.00
each with GBP0.90 per share transferred to the share premium
account to provide additional working capital.
On 26 April 2017, 6,521 Ordinary Shares were issued at GBP0.37
each with GBP0.27 per share transferred to the share premium
account to provide additional working capital.
8 Earnings per share
The calculation of earnings per share is based on the profit
attributable to the equity holders for the period of GBP921,000
(2016 - GBP659,000) and weighted average number of shares in issue
during the period of 24,806,775 (2016 - 22,726,615).
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.
Unaudited Unaudited Audited
Six months Six months Twelve
ending ending months
30 April 30 April ending
31 October
2016 2016 2016
GBP'000 GBP'000 GBP'000
Weighted average number of
ordinary shares for the purpose
of basic earnings per share 24,806,775 22,726,615 23,424,352
Effect of dilutive potential
ordinary shares 2,487,559 1,854,061 1,936,000
Weighted average number of
ordinary shares for the purpose
of diluted earnings per share 27,295,334 24,580,676 25,360,352
There are no adjustments between the Earnings for the purpose of
basic earnings per share being net profit attributable to
shareholders and the Earnings for the purpose of diluted earnings
per share.
There are no adjustments between the Net profit attributable to
equity holders of the parent and the Earnings from continued
operations for the purpose of diluted earnings per share excluding
discontinued operation.
Underlying earnings per share of GBP1,529,000 (2016 -
GBP1,101,000) have been calculated on the profit attributable to
the equity holders for the period after adding back Amortisation,
Depreciation and non-cash share based payments after adjusting the
tax provision accordingly.
9 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 2016 2016
GBP'000 GBP'000 GBP'000
Profit before tax for
the period 1,151 859 2,030
Adjustments for
Interest and other investment
income (6) (15) (34)
Interest expense 123 125 248
Depreciation, amortisation
and impairment 689 459 1,206
Equity settled share
based expense 72 72 110
Movements in working
capital
Decrease / (Increase)
in trade and other receivables (23) (140) (114)
(Decrease) / Increase
in trade and other payables (551) (445) (168)
-------------- -------------- --------------
Cash generated from operations 1,455 915 3,278
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSAESLFWSEEM
(END) Dow Jones Newswires
June 05, 2017 02:00 ET (06:00 GMT)
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