TIDMAFHP TIDMAFHB
RNS Number : 9356L
AFH Financial Group Plc
18 January 2021
18 January 2021
AFH Financial Group PLC
("AFH" or the "Group" or the "Company")
AUDITED FULL YEAR RESULTS FOR THE PERIODING 31(st) OCTOBER
2020
Seventh consecutive year of revenue growth and improved
profitability
AFH Financial Group PLC (AIM: AFHP), a leading financial
planning-led wealth management firm , today announces the Group's
consolidated audited results for the period ended 31 October
2020.
Financial highlights:
-- Revenues up 4% to GBP77.1 million (2019: GBP74.3 million)
-- Underlying* EBITDA up 5% to GBP18.1 million (2019: GBP17.2 million)
-- Underlying* EBITDA margin increased to 23.4% from 23.2%
-- Profit after tax maintained at GBP10.7 million (2019: GBP10.8 million)
-- Earnings per share 25.0 pence (2019: 25.4 pence)
-- Underlying** Earnings per Share increased to 34.1 pence (2019: 32.8 pence)
-- Dividend per share maintained at 6.0 pence (2019: 6.0 pence)
-- Funds under Management of GBP6.2 billion (2019: GBP6.2 billion)
*Underlying EBITDA excludes the 2020 IFRS 16 adjustment and the
non-cash charge for share based payment costs to provide a
like-for-like comparison.
**Underlying Earnings represents Underlying EBITDA as adjusted
for taxation.
Year of consolidation leaves AFH in strong position for
2021:
-- Both revenue and Underlying EBITDA growth achieved despite unprecedented market conditions
-- Reduced outstanding contingent consideration on past
acquisitions from GBP37.9 million to GBP19.3 million
-- Continued investment in technology enabled staff and advisers
to adapt quickly to the pandemic, maintaining contact with, and
providing ongoing services to clients
-- The Board expects the pace of consolidation within the sector to increase
-- The Board believes demand for financial planning-led wealth
management services will continue and towards the end of the
reporting period saw a gradual increase in net inflows of client
funds
-- The Company continues to be cash generative and maintains a strong cash position
-- Digital marketing expected to generate new opportunities for organic growth
-- Given the resilience shown in 2020 and the early months of
the 2021 financial year the Board views the coming year with
confidence and looks forward to continued success
Alan Hudson, Group Chief Executive, commented:
"I am pleased to report on another year of progress at AFH
towards our goal of becoming the UK's leading advice-led wealth
management company. Despite the disruption caused by COVID-19 and
the impact that it has had on our clients, advisers and staff, the
Company achieved both revenue and EBITDA growth whilst maintaining
our EBITDA margin.
"The Company continues to focus on the long-term needs of its
clients and on reducing their overall cost of investing. Our
clients entrust us to help them meet their financial planning
objectives and we recognise that over a period of 20 years or more
the cost of investing can represent a material cost compared to the
original investment. For this reason, the Company uses its size and
buying power for the benefit of its clients.
"The AFH business model remains underpinned by the culture that
is encapsulated in our values. The Board recognises the multitude
of stakeholders served by the AFH community and seeks to balance
the interests of all stakeholders when implementing its business
strategy.
"In the coming months we expect our strong pipeline of employed
advisers to join the firm, providing us with a significant boost to
AFH's advisory capacity and geographical reach at a time when we
see the demand for professional financial planning growing
significantly.
"As reported, even prior to the pandemic's impact on global
markets, 2020 was to be a year of consolidation for AFH and we are
extremely pleased to have finished the period with a strengthened
balance sheet, significantly reduced outstanding contingent
considerations and strong cash balances.
"Trading remains in line with the Board's expectations and the
resilience shown throughout 2020 and in the first months of the new
financial year leaves us confident for the year ahead.
" I would like to personally thank all our staff and advisers
for the way in which they reacted to the changes and for the
exceptional contribution that they collectively made to the Company
and our clients."
For further information, please contact:
AFH Financial Group PLC
Alan Hudson, Chief Executive Officer
Paul Wright, Chief Financial Officer 01527 577 775
Shore Capital (Nominated Adviser and
Broker)
Corporate Advisory: Hugh Morgan / Daniel
Bush / Sarah Mather
Corporate Broking Henry Wilcocks 0207 408 4090
Yellow Jersey PR Limited (Financial
PR)
Joe Burgess / Georgia Colkin / Annabel
Atkins 0776 93 25 254
This announcement is released by AFH Financial Group plc and
contains inside information. The person responsible for arranging
and authorising the release of this announcement is Paul Wright,
Chief Financial Officer of AFH Financial Group plc.
Chairman's introduction
Dear Shareholder
The period under review was one of unprecedented uncertainty and
it is a huge tribute to our staff, advisers and providers that we
were able to maintain and, in many cases, enhance our service to
clients throughout, whilst maintaining the profitability of the
Group.
As I set out at the beginning of 2020, the Board viewed the year
as one for consolidating the exceptional growth of previous
periods, carefully managing capital allocation and reducing the
contingent consideration outstanding on previous acquisitions. This
approach left the Company well placed to react quickly to the
COVID-19 crisis as it developed in the spring and enabled us to
progress through the year without the need for a change in
strategic direction. While 2020 may be seen as a year of
consolidation rather than growth, the Company was able to
strengthen its balance sheet and report increased revenues and
Underlying EBITDA compared to previous years.
The Board believes that its business model of advice-led
investment management and its client proposition that shares the
benefits of the AFH community through lower investment costs and no
platform fees has proved resilient during 2020, with outflows of
client funds remaining at prior year levels in contrast to the
increased outflows experienced by many in the sector.
Whilst new business inflows were impacted by COVID-19, requiring
our advisers to engage with clients and prospects remotely, the
post summer period saw a gradual increase in new business, driven
initially by mortgage work but latterly by investment advice.
Recurring revenues again tracked the major UK indices and,
despite a downturn at mid-year following the significant falls in
the equity markets, ended the year at a similar level to that
recorded in Q1.
During the period the Company reduced its outstanding contingent
consideration on past acquisitions from GBP37.9m to GBP19.3m and is
expecting to reduce this further to below GBP10m during the first
half of the 2021 financial year.
In March 2020, the Company repurchased a portion of its 4%
convertible unsecured loan stock due 2024 ("CULS") at a discount of
13% to the nominal face value of the CULS. Following this
repurchase, the aggregate outstanding nominal amount of the CULS
remaining in issue is GBP13.6m. In September, the Company also
repaid the outstanding 8% Unsecured Bonds at par as they
matured.
The above transactions were carried out using the Company's cash
resources and, while the HSBC facility of GBP12m was drawn down in
March and April, this cash was unspent and remained on the Company
balance sheet at the year end. On 15 January 2021 the HSBC facility
was extended to GBP20m on unchanged terms. This additional facility
has not been drawn.
Our people
The loyalty, professionalism and hard work of our employees and
advisers has never been as evident as in 2020, when we introduced
new processes and systems for remote working to facilitate the
smooth operation of the business in the face of a global
pandemic.
Despite the challenges of such a large scale shift, in March and
April the Company was able to connect over 300 employees to our
systems and infrastructure to enable remote working within a few
weeks and staff were extremely quick to adapt to this new style of
working. These changes have allowed us to maintain regular
interaction both within AFH's departments and adviser group and
externally with our clients. Since the start of the first national
lockdown we were able to provide weekly updates on technical,
regulatory and operational matters that were regularly attended by
over 100 advisers and staff.
I would like to personally thank all our staff and advisers for
the way in which they reacted to the changes and for the
exceptional contribution that they collectively made to the Company
and our clients.
It remains the Board's ambition to maintain the alignment of
interest between our employees and advisers with those of our
clients and shareholders. We continue to develop and promote our
people from within the Group at every opportunity, so that many key
positions are occupied by home-grown talent. It is the enthusiasm,
dedication and creativity of our staff and advisers that allows the
Group to continue to deliver according to its strategy and to
continue doing so even through times of adversity as we experienced
in 2020.
Dividend
The Board intends to continue the Group's progressive dividend
policy, while recognising the requirement to maintain sufficient
cash reserves within the Company to fund its growth strategy.
Having considered this, in light of the resilient performance
during the year under review, it is the Board's intention to
maintain the 2020 level of dividend and the Company will pay a
first interim dividend of 3p on 16 February 2021 to shareholders on
the register of members at the close of business on 29 January
2021, the ex-dividend date is 28 January 2021, and pay a second
interim dividend in July 2021. This second interim dividend will be
reviewed in light of the country being released from the current
lockdown restrictions and the impact on trading during the
period.
Outlook
The Board remains of the opinion that there is an increasing
requirement for a professional, financial planning-led approach to
wealth management delivered by trusted personal advisers and
supported by the effective use of technology.
The Board has worked to ensure the necessary infrastructure and
management is in place to support its growth plans for 2021 and
beyond and has been encouraged by the proven resilience of the
business under challenging economic and social conditions.
Continued investment in technology and digital media is expected to
accelerate the benefits of scale and the infrastructure investment
made in previous periods.
The Company continues to be cash generative and, during the last
year, has strengthened its balance sheet. The Board expects the
pace of consolidation within the sector to increase as commercial
factors and regulatory requirements encourage a smaller number of
larger businesses to dominate the sector and believes that AFH is
well positioned to benefit from this opportunity. As in previous
years, AFH will continue to focus on driving the organic growth of
the business, providing professional and cost-effective services to
clients while seeking appropriately priced opportunities to expand
its captive distribution throughout the financial sector to drive
increased profitability and shareholder return.
Given the resilience shown in 2020 and the early months of the
2021 financial year, which despite the current lockdown anticipates
a positive outcome from the vaccines being rolled out, together
with the anticipated acquisition opportunities, the Board views the
coming year with confidence and looks forward to continued
success.
John Wheatley
Chairman
15 January 2021
Chief Executive's report
I am pleased to report on another year of progress towards our
goal of becoming the UK's leading advice-led wealth management
company. Despite the disruption caused by COVID-19 and the impact
that it has had on our clients, advisers and staff, the Company
achieved both revenue and Underlying EBITDA growth whilst
maintaining our Underlying EBITDA margin.
The Company continues to focus on the long-term needs of its
clients and on reducing their overall cost of investing. Our
clients entrust us to help them meet their financial planning
objectives and we recognise that over a period of 20 years or more
the cost of investing can represent a material cost compared to the
original investment. For this reason, the Company uses its size and
buying power for the benefit of its clients. This was evidenced
during the period as the growth in our segregated mandates further
reduced the fund management charges to our clients and consolidated
our position of providing a market leading client proposition.
The AFH business model remains underpinned by the culture that
is encapsulated in our values. The Board recognises the multitude
of stakeholders served by the AFH community and seeks to balance
the interests of all stakeholders when implementing its business
strategy. This was particularly apparent in the Group's acquisition
strategy, where an alignment of cultures has been proven to be
fundamental to the integration and success of our acquired
businesses.
New business revenues were significantly impacted during the
second half of the year as uncertainty and the reduced
opportunities for our advisers to meet and establish relationships
with new clients combined to limit the amount of financial advice
given and, in turn, the inflows of new portfolios. However, our
continued investment in technology in prior years enabled our
advisers to adapt quickly, maintaining contact with, and providing
ongoing services to, existing clients. This was enhanced during the
second half of the year by the roll-out of our client portal and
wider dissemination of our technical and investment updates to our
clients through digital media.
New business in the protection division benefitted from an
initial surge in public interest in life and critical illness
insurance. This was, however, tempered in the final quarter as
cancellation of policies taken out at the height of the national
lockdown was higher than usual as the perception of the likely
spread and severity of COVID-19 changed following the government's
relaxation of restrictions.
Notwithstanding the above, new business levels in the wealth
management division slowly increased during the latter part of the
year and, whilst not returning to pre COVID-19 levels, the trend
gives us confidence for the new financial year and the anticipated
need for professional financial planning as the economic and fiscal
impact of the pandemic is transmitted through society.
Recurring revenues increased during the period in spite of the
market downturn at mid-year and again proved our investment
approach across the various attitude to risk investment models.
Recurring revenue accounted for 78% of total revenue in the wealth
management division, an increase from 72% in 2019.
Strategy
The Group strategy to increase shareholder value through the
expansion of the AFH community remains at the heart of AFH's
growth. While in 2020 the Company withdrew from the acquisition
market in order to consolidate its previous growth and to
strengthen its balance sheet through the reduction of outstanding
debt and contingent consideration, our strategy of combining
organic growth through greater productivity of our advisers
together with value accretive acquisitions financed on an earn out
model remains unchanged. The financial success of our strategy is
monitored regularly by the Board against KPIs and is measured
against the three key aspirational targets set by the Board in
2019.
Culture is at the centre of any successful organisation and
remains the driving force of both our internal growth and
acquisitions. Our values, which are detailed in the Annual Report,
have been documented to ensure that we are able to measure our
progress and achieve both our vision and financial aspirations.
Central to our strategy is to put clients' interests first to
build a sustainable business that reflects our vision, including a
drive to reduce the cost of ancillary third-party services for our
clients and to embrace them in the AFH community. During the year,
we continued to reduce third party fees to provide a market leading
client proposition while retaining our status as independent
financial advisers, providing access for our clients to the market
at institutional prices.
Financial Performance
Despite the impact of COVID-19 on the business and the temporary
withdrawal from the acquisition market, the year under review
produced a seventh consecutive year of revenue growth and improved
profitability since joining AIM in 2014. Increased revenues and
tight control of our fixed cost base resulted in stable statutory
Earnings Per Share of 25.0p while underlying Earnings Per Share,
excluding the benefit of IFRS 16, increased by 4% to 34.1p.
Total revenue for the 12 months ended 31 October 2020 of GBP77.1
million was 4% above the corresponding period (2019: GBP74.3
million) reflecting the resilience of the business in extraordinary
times.
The continuing requirement of our clients for financial advice
and protection insurance generated GBP29.8m (2019: GBP28.3m) of new
business revenues, while recurring income of GBP47.3m (2019
GBP46.0m) continued to demonstrate the strength of our revenue base
and earnings quality.
Our retention of existing clients and their investment funds
continued to be high with outflows, including pension drawdown,
remaining at 3% of opening funds under management.
Gross margins declined in our protection business during the
year following the strategic change in product mix. This reduced
the divisional gross margin to 37%. While the gross margin of our
Wealth Management division remained constant, at a consolidated
level the protection division change reduced the overall gross
margin from 53% to 50%.
Funds under Management
GBP billion
Reported as at 1 November
2019 6.2
-----------------------
Gross Inflows from organic
growth 0.35
-----------------------
Market impact (0.2)
-----------------------
Outflows (0.15)
-----------------------
Balance as at 31 October
2020 6.2
-----------------------
During the year we were able to increase our Underlying EBITDA
and to maintain our Underlying EBITDA margin above 23% (2019:
23.2%) despite the reduction in the gross margin caused by the
revised mix of business in the protection division and the impact
of COVID-19.
Interest charges increased during the year as the 12-month
impact of the 4% CULS was recognised and the Company drew down the
HSBC facility at a net annualised cost to the business of
1.75%.
Profit after tax for the year of GBP10.7m (2019: GBP10.8m)
confirmed the resilience of the business and enabled the Company to
maintain its dividend during the year whilst maintaining
appropriate cash reserves throughout the year. Statutory Earnings
Per Share remained stable at 25.0p (2019:25.4p). Underlying EBITDA,
adjusted for tax per share, being Underlying EBITDA less a current
tax charge at 19%, is a key measure used by the Board which
reflects the cash-based Earnings Per Share generated by the
business. This increased slightly to 34.1p (2019: 32.8p).
Investment in Technology and Digital
For many years we have seen increased technology supporting our
face-to-face advisory model as fundamental to the future of our
business and have consistently invested in technology both
operationally and for the benefit of our clients. The events of
2020 demonstrated the value of this strategy. 2020 was a year of
further investment, with over GBP1.5m expensed as we targeted long
term operational efficiencies and a streamlined experience for our
clients in addition to supporting our staff and advisers working
remotely.
In addition to supporting over 300 staff and our IFAs to work
remotely from our offices, 2020 saw the launch of our client portal
and an increased focus on digital marketing. We will continue to
build on these and new technology solutions in the future in order
to enhance the support provided to our advisers and services
offered to clients. We are also currently looking at offering
cyborg advisory services to provide greater flexibility in our
interaction with existing and potential clients.
Our marketing strategy continues to embrace the digital
opportunities for the sector. For a number of years, the Group has
invested in establishing a marketing capability to support a
growing national business and to extend beyond the traditional IFA
routes to market. While we believe that face-to-face advisory
remains the best model to serve clients' needs, our evolving
digital approach has already started to expand our target market
and to provide benefits to individuals and corporates who join the
AFH community.
We believe that our approach to technology, together with our
focus on reducing third party costs for our clients, will provide
clear commercial advantages for our clients and advisers and enable
AFH to benefit from further consolidation in the market, generating
significant shareholder and client value in the future.
Review of investment climate in 2020
The year was a rollercoaster ride for investors, dominated by
the fallout from the COVID-19 pandemic and policymakers' responses
to it. The period started well enough, with markets buoyed by a
victory for the Conservative Party in the December 2019 UK general
election, the avoidance of a 'no-deal' Brexit and the signing of
the US-China 'phase-one' trade deal in January. However, as the
pandemic spread from China to the rest of the world, the
introduction of stringent lockdown restrictions resulted in an
unprecedented contraction in the global economy during the spring.
Although the lifting of lockdown measures ushered in a sharp
rebound during the summer, most major economies - with the notable
exception of China - ended the period with economic activity still
well below pre-pandemic levels.
While the disruption wrought by the pandemic was unprecedented,
global policymakers' response to it was also on a scale never seen
before. Governments around the world spent in excess of US$10
trillion on various relief measures - such as furlough schemes,
benefit top-ups and loans - to support households and businesses.
Meanwhile, central banks cut interest rates, injected liquidity
into markets and restarted quantitative easing (QE, or bond buying)
programmes.
These interventions served to underpin financial markets.
Despite the huge increase in borrowing, yields on developed market
government bonds hit record lows as central banks committed to buy
vast quantities of debt, and investors anticipated that official
interest rates would stay close to zero for years to come. Amidst
speculation that the Bank of England would at some stage take
interest rates below zero (a fate which has so far been avoided),
yields on short-dated UK government bonds spent much of the year in
negative territory. As bond prices move inversely with yields,
Gilts delivered solid single-digit returns over the period.
In turn, ultra-low government bond yields boosted the relative
appeal of other assets. The combination of negative 'real' (i.e.
after inflation) bond yields and the uncertainty created by
COVID-19 helped push the gold price to a record high of just above
US$2000 per ounce in early August. Despite a subsequent pull-back,
gold still notched up a gain in excess of 20% over the year.
The liquidity injections from central banks also spurred a
turnaround in global equity markets. After a positive start to
2020, the mood amongst equity investors turned sour towards the end
of February as the ramifications of global COVID-19 lockdowns
became clear. Between 19th February and 23rd March, global equities
(as measured by the iShares MSCI ACWI ETF) fell nearly 34% - the
fastest drop ever recorded. However, supported by record monetary
and fiscal stimuli, the bounce back was also extraordinarily swift,
with the broad global market regaining its prior peak at the end of
August and recording a gain of around 4% over the 12-month
period.
However, this headline performance masked a wide divergence
between regions and market sectors. With lockdowns accelerating the
move towards 'online living', the big tech companies that profited
from this trend (e.g. Amazon, Microsoft, Netflix etc.) led the
market higher. As a result, the US equity market, home to most of
these tech titans, outperformed and returned nearly 10% during the
year. Chinese equities benefited not only from a high exposure to
the tech/online sector, but also from Beijing's relatively
successful containment of the virus and the subsequent 'V-shaped'
recovery in the Chinese economy. As a result, Chinese equities
outshone other major markets during the period, rising more than
30%.
A relatively high exposure to underperforming sectors and a low
representation of companies in the tech sector meant that UK
equities were one of the worst-performing markets during the year.
Despite relatively generous government support for households and
businesses, the UK experienced a worse economic contraction than
its developed market peers. Deep cuts to dividends took a heavy
toll on a market whose income-generating qualities have
historically been a key attraction. By the end of the 12-month
period, the broad UK equity market was down more than 20%. The
disappointing performance of our domestic market highlighted the
importance of a diversified portfolio, both in terms of asset class
and geography.
Segmental review
Financial advisory and investment management
Financial advisory, and the ongoing investment management of our
client portfolios, represents the core business of AFH. Likewise,
the management of our clients' funds is driven by their attitude to
risk on the basis of long-term investments that are measured
against the equivalent ARC Private Client Index ("PCI") and
reported regularly to our clients, providing the opportunity for
them to measure our investment performance in the context of a
range of discretionary investment managers.
The average discretionary portfolio managed on behalf of our
clients continues to be approximately GBP200,000 of investable
assets, the construction of which is primarily based on a client's
risk appetite and focused on wealth preservation. However, for
clients with larger portfolios who wish for a more traditional
stockbroking service, AFH Private Wealth was established in 2016
and now manages over GBP250m of client assets, operating from
Bromsgrove and Colwyn Bay.
During the period we have grown our employed adviser base to
complement the already established self-employed adviser model.
This strategy has allowed us to broaden our appeal in the IFA
market and recruit in a challenging market where demand continues
to exceed supply. While having no financial impact on the year
under review, this strategy has enabled the Company to enter 2021
with a strong pipeline of employed advisers who are scheduled to
join AFH in the first calendar quarter of 2021, providing a
significant boost to our capacity and geographic penetration at a
time when the need for professional financial planning is expected
to be at exceptional levels.
During the year, our initial financial planning fees totalled
GBP12.7m (2019: GBP15.1m), reflecting the challenges faced by our
advisers during the year as highlighted above. Ongoing management
fees increased to GBP47.3m (2019: GBP43.0m), in spite of the
markets, which spent much of the year below prior year levels, and
the modest levels of net inflows from new and existing clients.
This increase was reflected in the ratio of recurring income to new
business within this division, which increased to 78% for the
period.
Employment costs remain the major fixed cost of the division,
accounting for over 80% of all fixed cash expenditure. During the
year, all of our staff agreed to a temporary salary reduction in
the light of the uncertainty as to how the business would be
impacted by the COVID-19 pandemic. In asking staff to make this
sacrifice the Board considered the short-term effect of the 2007
financial crisis when over 60% of new business was lost in the
period following the initial crash and I echo the thanks of the
Chairman to all of our staff for their action. I am also pleased to
report that the full impact of the reduction was only applied for
three months and all staff were returned to their original salaries
in September 2020.
As noted above, the division invested heavily in IT and
marketing initiatives during the year which enabled it to maintain
a full service to our clients throughout the year. The digital
marketing drive, which was launched in June 2020, showed
significant promise with the cost per lead and conversion rates
both in line with the Board's expectations, based on the marketing
studies undertaken prior to launch. Whilst the project remains at
an early stage and the full revenue benefits of this new channel to
market are not apparent in the 2020 results, we are pleased with
progress to date and the initial results and will continue to
monitor closely. Notwithstanding this increased cost, the division
generated an increased EBITDA of GBP16.5m, (2019: GBP14.2m),
representing a 28% margin on revenue (2019: 24%).
Protection broking
As outlined in November 2019, during the period the focus of
this division was on cash generation and the maintenance of the
working capital requirements from the Company. This was anticipated
to reduce the gross margin significantly from the 54% level
reported in 2019 as the ratio of indemnified vs non-indemnified
policies written moved significantly in favour of the former.
Our face-to-face protection broking business, Eunisure, enjoyed
a strong first half continuing to perform well during the initial
lockdown in spring 2020 when demand for protection products
increased across the sector as the public became more aware of the
dangers of remaining underinsured.
The fourth quarter of the year saw a fall in demand for new
protection insurance and a number of policies taken out during the
initial stages of the pandemic cancelled as public confidence
increased with reduced government restrictions. Notwithstanding the
somewhat turbulent nature of the year the division was able to
increase revenues to GBP17.1 m (2019: GBP14.2m).
The division generated EBITDA of GBP4.6 m (2019: GBP5.4m),
representing a 27% margin on revenue (2019: 38%), reflecting the
decreased gross margin following the strategic change in the
product mix of this division.
Capital structure
As reported in 2019, in assessing its financial gearing, the
Board considers the structure of the AFH acquisition model with
over 50% of the maximum consideration to be contingent and subject
to performance criteria as a component of the Group's financing
structure. In November 2019 the Board decided to reduce the overall
level of gearing by the reduction of the contingent consideration
balances, which at 31 October 2019 totalled GBP37.9m, and by using
its trading cash surplus and banking facilities to repay the 8%
Loan Notes that matured in September 2020.
The Group continues to maintain a strong cash position and,
furthermore, all regulated subsidiary companies reported
significant margins above their regulatory and stress-tested
capital requirements as at 31 October 2020.
As noted in the Chairman's Statement, in March 2020 the Company
repurchased a portion of the 4% CULS, issued in August 2019, at a
discount of 13%. As at 31 October 20120 there remained GBP13.6m
CULS outstanding, convertible at a price of GBP4.20 per share and
maturing in August 2024.
At the year end, the Group had a maximum GBP19.3m of contingent
consideration outstanding over the next three financial periods,
subject to performance criteria, together with GBP13.6m of CULS.
Based on past performance it is unlikely that all of the contingent
consideration would become payable.
Current year trading
Trading in the initial months of the current year continued
resiliently in the face of continued uncertainty. In the coming
months we expect our strong pipeline of newly employed advisers to
join the firm, providing us with a significant boost to AFH's
advisory capacity and geographical reach at a time when we see the
demand for professional financial planning growing
significantly.
As reported, even prior to the pandemic's impact on global
markets, 2020 was to be a year of consolidation for AFH and we are
extremely pleased to have finished the period with a strengthened
balance sheet, significantly reduced outstanding contingent
considerations and strong cash balances.
Trading remains in line with the Board's expectations and the
resilience shown throughout 2020 and in the first months of the new
financial year leaves us confident about the year ahead.
Alan Hudson
Chief Executive Officer
AFH FINANCIAL GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 OCTOBER 2020
2020 2019
Note GBP'000 GBP'000
Revenue 77,128 74,337
Cost of sales (38,827) (34,657)
Gross profit 38,301 39,680
Other operating income 156 -
Administrative expenses (19,620) (22,452)
EBITDA 18,837 17,228
Right of use asset depreciation charge (779) -
Underlying EBITDA 1 18,058 17,228
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- --------- ---------
Other amortisation and depreciation (3,734) (3,189)
Non cash share-based payments (168) (50)
Operating profit 3 14,156 13,989
Finance income 29 57
Finance costs (1,024) (332)
Profit before tax 13,161 13,714
Income tax expense (2,446) (2,901)
Profit for the year attributable to owners of the parent 10,715 10,813
Other comprehensive income - -
Total comprehensive income for the year attributable to owners of the parent 10,715 10,813
Earnings per share (in pence)
Basic 9 25.0 25.4
Diluted 23.0 23.5
Underlying EBITDA adjusted for tax per share (in pence)
Basic 34.1 32.8
Diluted 31.4 30.4
All results derive from continuing operations.
AFH FINANCIAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 OCTOBER 2020
2020 2019
Note GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 5 98,330 104,921
Property, plant and equipment 1,426 1,413
Right of use assets 4,528 -
Investments 1 1
Deferred tax asset 15 23
104,300 106,358
Current assets
Trade and other receivables 6 29,760 26,232
Cash and cash equivalents 13,111 11,955
42,871 38,187
Total assets 147,171 144,545
Liabilities
Current liabilities
Trade and other payables 8 22,661 23,373
Current tax liabilities - 1,224
Provisions 1,923 1,448
Financial liabilities - Borrowings 7 81 832
Lease liabilities 760 -
25,425 26,877
Net current assets 17,446 11,310
Non-current liabilities
Trade and other payables 8 4,181 23,467
Financial liabilities - Borrowings 7 25,783 15,241
Provisions 249 161
Lease liabilities 3,907 -
34,120 38,869
Total liabilities 59,545 65,746
Net assets 87,626 78,799
Shareholders' equity
Share capital 4,298 4,279
Share premium account 56,280 55,986
Treasury shares - (204)
Merger reserve (540) (540)
Share-based payment reserve 936 768
Retained earnings 26,652 18,510
Total Shareholders' equity 87,626 78,799
Approved by the Board of Directors on 15 January 2021.
Mr P K Wright
Director
AFH FINANCIAL GROUP PLC
STATEMENT OF CHANGES IN EQUITY
AS AT 31 OCTOBER 2020
Share-based
Share Share Treasury Merger payment Retained
capital premium shares reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
November 2018 4,198 54,641 - (540) 718 10,403 69,420
Profit for the year - - - - - 10,813 10,813
Other comprehensive - - - -
income - - -
Total comprehensive
income - - - - - 10,813 10,813
Issue of share
capital (net of
issue costs) 81 1,345 - - - - 1,426
Share based payment
cost - - - - 50 - 50
Acquisition of
treasury shares - - (204) - - - (204)
Dividend - - - - - (2,706) (2,706)
Balance at 31
October 2019 4,279 55,986 (204) (540) 768 18,510 78,799
Profit for the year - - - - - 10,715 10,715
Other comprehensive - - - -
income - - -
----------- ----------- ---------- ----------- ------------ ---------- --------
Total comprehensive
income - - - - - 10,715 10,715
Issue of share
capital (net of
issue costs) 19 294 - - - - 313
Share based payment
cost - - - - 168 - 168
Sale of treasury
shares - - 204 - - - 204
Dividend - - - - - (2,573) (2,573)
Balance at 31
October 2020 4,298 56,280 - (540) 936 26,652 87,626
AFH FINANCIAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 OCTOBER 2020
2020 2019
Note GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 10 14,498 5,787
Tax paid (3,331) (2,608)
Net cash inflow from operating activities 11,167 3,179
Cash flows from investing activities
Purchase of property, plant and equipment (788) (834)
Purchase of intangible assets, net of cash (2,087) (3,830)
Acquisition of subsidiaries, net of cash - (9,378)
Payment of contingent consideration (13,611) (8,007)
Interest received 29 57
Net cash outflow from investing activities (16,457) (21,992)
Cash flows from financing activities
Proceeds from issue of shares - -
Share issue costs - -
Proceeds from CULS - 15,000
Proceeds from HSBC Facility agreement 12,000 -
Issue costs - (536)
Repayment of borrowings (2,053) (2,314)
Interest paid (778) (219)
Dividends (2,723) (2,706)
Net cash inflow from financing activities 6,446 9,225
Net increase in cash and cash equivalents 1,156 (9,588)
Cash and cash equivalents at the beginning of the year 11,955 21,543
Cash and cash equivalents at the end of the year 13,111 11,955
AFH FINANCIAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 OCTOBER 2020
1. General Information
AFH Financial Group PLC is a public limited company limited by
shares incorporated in England and Wales under the Companies Act
2006 and is registered at AFH House, Buntsford Drive, Stoke Heath,
Bromsgrove, Worcestershire, B60 4JE.
The Group is principally engaged in the provision of independent
financial advice and investment management to the retail
market.
While the financial information has been prepared for the year
ended 31 October 2020, this extract does not constitute statutory
accounts under s455 of the Companies Act
2. Revenue and segmental analysis
The Board of Directors is considered to be the chief operating
decision maker of the Group.
Segmental statement of comprehensive income
The following is an analysis of the Group's revenue and results
from continuing operations by reportable segment.
Financial Advice and Investment
Head Office Management Protection Total
2020 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------------------------- ------------- ---------
Revenue - 59,995 17,133 77,128
Cost of sales (23) (28,091) (10,713) (38,827)
Gross profit (23) 31,904 6,420 38,301
Other operating income 156 - - 156
Administrative expenses before
amortisation and depreciation and
share based payments expenses (2,391) (15,405) (1,824) (19,620)
EBITDA (2,258) 16,499 4,596 18,837
Amortisation and Depreciation - (4,486) (27) (4,513)
Non cash share based payments (168) - - (168)
Operating profit (2,426) 12,013 4,569 14,156
Finance income 29 - - 29
Finance costs (1,024) - - (1,024)
Profit before tax (3,421) 12,013 4,569 13,161
Financial Advice and Investment
Head Office Management Protection Total
2019 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------------------------- ------------- ---------
Revenue - 60,114 14,223 74,337
Cost of sales - (28,099) (6,558) (34,657)
Gross profit - 32,015 7,665 39,680
Administrative expenses before
amortisation and depreciation and
share based payments expenses (2,374) (17,784) (2,294) (22,452)
Underlying EBITDA (2,374) 14,231 5,371 17,228
Amortisation and Depreciation - (3,119) (70) (3,189)
Non cash share based payments (50) - - (50)
Operating profit (2,424) 11,112 5,301 13,989
Finance income 41 16 - 57
Finance costs (317) (15) - (332)
Profit before tax (2,700) 11,113 5,301 13,714
Segment revenue reported above represents only revenue generated
from external customers. Intersegmental sales in the financial year
were GBP1,272,986 (2019: GBP1,093,343) for management recharges
from head office to the Financial Advisory and Protection
Divisions. There were also GBP571,373 (2019: GBP497,333) of
intersegmental sales for the introduction of business between the
Financial Advisory and Protection Divisions. These intersegmental
revenues and costs have been removed on consolidation.
The Accounting policies of the reportable segments are the same
as the Group's accounting policies.
Segmental Assets
The following is an analysis of the Group's Assets from
continuing operations by reportable segment.
2020 2019
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Head Office 6,250 6,638
Financial Advice and Investment Management 16,958 13,120
Protection 19,663 18,429
42,871 38,187
-------------------------------------------- ---------- ----------
Segmental Liabilities
The following is an analysis of the Group's Liabilities from
continuing operations by reportable segment.
2020 2019
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Head Office 1,793 546
Financial Advice and Investment Management 21,240 18,335
Protection 2,392 7,996
25,425 26,887
-------------------------------------------- ---------- ----------
The total revenue of the Group for the year has been derived
from its activities wholly undertaken in the United Kingdom.
No customer is defined as a major customer by revenue,
contributing more than 10% of the Group revenues (2019 - none).
3. Operating Profit
2020 2019
GBP'000 GBP'000
Operating profit is stated after charging:
Employee benefit expenses 18,760 19,741
Amortisation and impairment of intangible
assets 3,205 2,820
Depreciation of Property, plant & equipment 529 369
Depreciation of Right of use assets 779 -
Operating lease rentals - 826
Services provided by the Group's auditors:
A summary of the audit and non-audit fees in respect of services
provided by the Group's auditors charged to operating profit is set
out below:
2020 2019
GBP'000 GBP'000
Fees payable to the Group's auditor for the audit
of the Group's annual accounts 23 23
Audit of accounts of subsidiaries 70 70
Total Audit Fees 93 93
Other assurance services 2 2
Taxation services * - 7
Total Non-Audit Fees 2 9
* Taxation services no longer fall into scope of the Group's
auditors.
4. Dividends - Company
2020 2019
GBP'000 GBP'000
Ordinary interim paid 2,573 2,555
Dividend per share 6p 6p
It is the Board's intention to maintain the 2020 level of
dividend and will pay a first interim dividend of 3p on 16 February
2021 to shareholders on the register of members at the close of
business on 29 January 2021, the ex-dividend date is 28 January
2021, and pay a second interim dividend in July 2021. This second
interim dividend will be reviewed in the light of the country being
released from the current lockdown restrictions and the impact on
trading during the first half of 2021.
The group is proposing, pending AGM approval, an interim
dividend based on the reported results of 3p per share, which
equates GBP1,289,445 based on the current shares in
circulation.
5. Intangible assets
Other intangibles Acquired
client
Goodwill portfolios Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 November 2018 546 28,405 52,331 81,282
Additions, separately acquired 336 - 11,038 11,374
Additions, through business combination 31 22,428 - 22, 459
Remeasurement - (1,020) - (1,020)
At 31 October 2019 913 49,813 63,369 114,095
Additions, separately acquired 220 - 1,498 1,718
Additions, through business combination - - - -
Remeasurement - (3,000) - (3,000)
Impairment - (2,104) - (2,104)
At 31 October 2020 1,133 44,709 64,867 110,709
Amortisation and impairment
At 1 November 2018 57 375 5,922 6,354
Charge for the year 60 - 2,760 2,820
------------------- --------- ------------ --------
At 31 October 2019 117 375 8,682 9,174
Charge for the year 127 - 3,078 3,205
------------------- --------- ------------ --------
At 31 October 2020 244 375 11,760 12,379
------------------- --------- ------------ --------
Net book value
=================== ========= ============ ========
At 31 October 2020 889 44,334 53,107 98,330
=================== ========= ============ ========
At 31 October 2019 796 49,438 54,687 104,921
=================== ========= ============ ========
Goodwill and acquired client portfolios
Goodwill believed to have an indefinite useful life is carried
at cost. The determination of whether goodwill is impaired requires
an assessment of the value in use. The recoverable amount of
goodwill on a value in use calculation is based on the discounted
cash flows expected from the intangible assets of each acquisition,
assuming a future growth rate of 3% in revenue generated cash
flows, discounted at an asset specific rate of 3%, for a period of
10 years with no annuity. On this basis the directors believe the
value of goodwill is not impaired at 31 October 2020.
The Directors have assessed those assets where an indicator of
impairment is raised and applied appropriate sensitivity of the
assumptions detailed above and consider that the indicator only
exists due to the level of prudence already factored into these
assumptions. The impairment charge of GBP2.1m is offset against a
GBP2.1m reduction is contingent consideration. The impairment is
based on the directors detailed review of expected future cashflows
of relevant CGU's.
Due to the level of prudence already factored into the
assumptions, it would require a significant adverse variance in any
of these to reduce the fair value to a level where it matched the
carrying value.
During the year ended 31 October 2020 two acquisitions were
undertaken relating to acquired client portfolios. Consideration
for these acquisitions amounted to GBP1.5m. Included within the
total consideration are amounts relating to contingent
consideration of GBP1.3m. The contingent consideration is subject
to earn outs based on future turnover over a period up to a
four-year period.
6. Trade and other receivables
2020 2019
GBP'000 GBP'000
Trade receivables net of allowance for impairment 25,184 21,592
Other receivables 2,763 3,087
Prepayments 1,813 1,553
29,760 26,232
Included in trade receivables is GBP8,068,824 of debtors due in
relation to non-indemnified income earnt collectable over a 4 year
term (2019: GBP10,278,822) which is net of a GBP314,003 allowance
for impairment (2019: GBP1,412,368). GBP6,271,614 of this trade
receivable is due in greater than 1 year and collected over the
life of the policy (2019: GBP7,033,971). The effect of discounting
the trade receivable due in greater than 1 year would be a
reduction of GBP380,004 to net assets (2019: GBP440,418).
7. Borrowings
2020 2019
GBP'000 GBP'000
8% Unsecured bonds - 752
4% Convertible Unsecured Loan Stock 13,600 15,000
HSBC Facility agreement 12,000 -
Mortgage on freehold property 264 321
25,864 16,073
Analysis of borrowings
Current borrowings
8% Unsecured bonds - 752
Mortgage on freehold property 81 80
81 832
Non-current borrowings
4% Convertible Unsecured Loan Stock 13,600 15,000
HSBC Facility agreement 12,000 -
Mortgage on freehold property 183 241
25,783 15,241
The borrowings are recognised at amortised cost. There is no
material difference between the fair value and the carrying
value.
The 8% unsecured bond issued in August 2013 was settled in the
year.
The mortgage is repayable by instalments over an 8-year period
with an interest rate of 2.9% over LIBOR. GBP460,000 of Freehold
Land is secured against this liability.
The 4% Convertible Unsecured Loan Stocks (CULS) were issued in
July 2019 and are due for redemption or conversion in 5 years.
During the year, CULS with a value of GBP1.4m were purchased by
the Company, resulting in a profit of GBP155,512 recognised under
Other operating income in the Statement of Profit & Loss.
The HSBC Facility agreement has a cap of GBP12m of which
interest is charged at 2.75% over LIBOR. Covenant reporting is
undertaken quarterly with the Group adhering to these.
8. Trade and other payables
Group
2020 2019
GBP'000 GBP'000
Current
Trade payables 978 1,853
Contingent consideration 15,212 14,433
Commissions payable 5,556 5,357
Other payables 401 745
Accruals 514 985
22,661 23,373
Non-current
Contingent consideration 4,181 23,467
The effect off discounting the non-current contingent
consideration would be a reduction in the carrying value of
GBP121,036.
A remeasurement of contingent consideration was recorded within
the year against the appropriate Goodwill/Intangible.
9. Earnings per share
The calculation of earnings per share is based on the profit
attributable to the equity holders for the year of GBP10,714,744
(2019 - GBP10,813,160) and weighted average number of shares in
issue during the period of 42,894,332 (2019 - 42,495,124).
The calculation of Underlying EBITDA adjusted for tax per share
is based on the Underlying EBITDA adjusted for tax of GBP15,258,227
(2019 - GBP13,954,788) and weighted average number of shares in
issue during the period of 42,894,332 (2019 - 42,495,124).
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.
31 October 31 October
2020 2019
GBP'000 GBP'000
Earnings for the purpose of basic earnings per
share being net profit attributable to shareholders 10,715 10,813
Effect of dilutive potential ordinary shares - -
Earnings for the purpose of diluted earnings
per share 10,715 10,813
31 October 31 October
2020 2019
Weighted average number of ordinary shares for
the purpose of basic earnings per share 42,894,332 42,495,124
Effect of dilutive potential ordinary shares 3,729,143 3,453,911
Weighted average number of ordinary shares for
the purpose of diluted earnings per share 46,623,475 45,949,035
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.
10. Notes to the cash flow statement
Cash generated from operations
2020 2019
GBP'000 GBP'000
Profit before tax 13,161 13,714
Adjustments for:
Interest and dividend income (29) (57)
Interest expenses 1,024 332
Depreciation, amortisation and impairment 4,514 3,189
Equity settled share-based payment expense 168 50
Movements in working capital:
- Trade and other receivables (3,587) (12,627)
- Trade and other payables (753) 1,186
Cash generated from operations 14,498 5,787
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 rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR BRMITMTIBBPB
(END) Dow Jones Newswires
January 18, 2021 02:00 ET (07:00 GMT)
Afh Financial (LSE:AFHP)
過去 株価チャート
から 6 2024 まで 7 2024
Afh Financial (LSE:AFHP)
過去 株価チャート
から 7 2023 まで 7 2024
