AFH Financial : Full year results for period ending 31 Oct 2016

Full year results for period ending 31 Oct 2016

RNS Number : 3822V AFH Financial Group Plc 30 January 2017

30th January 2017

AFH Financial Group PLC ("AFH" or the "Group" or the "Company") AUDITED FULL YEAR RESULTS FOR THE PERIOD ENDING 31st OCTOBER 2016 Strong organic growth driving increased profits; dividend increased by 33%

The Directors of AFH (the "Directors"), the rapidly growing wealth management and financial advisory business, today announce the Group's consolidated audited results for the period ending 31 October 2016 reflecting continued growth, an increase in earnings per share of 20% and a 33% increase in dividend per share.

Strong organic growth delivered through captive distribution model

 Revenues up 15% to £24.1 million (2015: £21.0 million)

 Gross margin increased to 55% (2015: 52%)

 Recurring revenue as a percentage of total revenue increased to 68% (2015: 65%)

 EBITDA up 29% to £3.6 million (2015: £2.8 million)

 Profit after tax up 43% to £1.7 million (2015: £1.2 million)

 Earnings per share up 20% to 7.16 pence (2015: 5.95 pence)

 Funds under Management up 11% to £2.0 billion (2015: £1.8 billion)

Significant growth potential

 Increasing organic demand for financial planning led wealth management services

 Strong pipeline of acquisition opportunities supported by cash reserves of

£6.7 million (2015: £3.7 million)

 Proven track record of successful acquisitions: over 90% of deferred consideration for those acquisitions reaching a deferred consideration milestone was earned and paid during 2016

John Wheatley, Chairman, and Alan Hudson, Group Chief Executive, commented:

"The Group has again proven its ability to increase revenue with strong organic growth that has generated a double digit increase in funds under management during the period whilst improving gross margins. This year has seen the early realisation of the benefits of scale and the infrastructure investment made in previous periods. Continued investment in technology, enabling a digitalised approach to our clients in the future, is expected to accelerate the benefits of scale and the infrastructure investment made in previous periods."

"In a year in which the Group completed two acquisitions, the significant growth and improving margins are testament to the strategy set out by the Board in 2014 to place financial planning through face to face advice at the forefront of our proposition, supported by a strong infrastructure and professional investment management team."

Ends

Enquiries:

AFH Financial Group PLC Alan Hudson, Chief Executive Officer Paul Wright, Chief Financial Officer	01527 577775
Liberum (Nominated Adviser and Broker) John Fishley / Richard Bootle	020 3100 2000
Camarco Geoffrey Pelham-Lane / Jennifer Renwick	0203 757 4985

Chairman's statement Business Review

I am pleased to report another successful year. Following strong inflows to our funds under management, the Company has enjoyed significant organic growth with increases in both revenue and profitability and continues to provide high quality services to our growing portfolio of clients nationwide.

The Group has again proven its ability to increase revenue with strong organic growth that has generated a double digit increase in funds under management during the period whilst improving gross margins. This year has seen the early realisation of the benefits of scale and the infrastructure investment made in previous periods.

Our success during the year has been driven by the captive distribution model afforded by our advisers, who have added over £200 million of assets to our discretionary portfolios. It supports our belief that a financial planning led approach to the management of our clients' wealth, based on the highly personal face to face relationship between them and our advisers, is key to ensuring that their interests remain at the centre of our operations.

The Company completed two asset purchase acquisitions in 2016 as the focus remained on successfully integrating the businesses purchased in 2015. We continue to discerningly evaluate further opportunities in line with our strategy of making selective acquisitions that will enhance shareholder value. The success of this approach has been seen in the high level of retained clients and advisers from previous transactions and the level of earn out deferred payments made during the year. The Company paid £4.3 million in deferred consideration to the vendors of historical acquisitions,

representing over 90% of the maximum consideration targeted at the time of each acquisition. As at 31 October 2016 the Company had generated a strong pipeline of acquisition opportunities that meet the Board's financial and cultural criteria.

The success of our ability to integrate numerous acquisitions and confirmation of the robustness of our business model, which has demonstrated the financial strength of the Company and facilitated both revenue and earnings growth during a period without multiple acquisitions, gives the Board great confidence as it embarks on further acquisitions in 2017.

In spite of turbulent financial markets in 2016 and the political uncertainty caused by the EU Referendum and the US presidential elections, AFH's range of portfolios has continued to perform well and during the year over 90% of new money invested by our clients was placed in our Discretionary funds.

In periods of uncertainty and at a time when people are being encouraged by the Government to take greater responsibility for their financial wellbeing, the Company believes that long-term demand for personal independent financial advice will continue to grow. AFH is well positioned to meet this increasing need and to benefit from the demographic and regulatory changes that have occurred in recent years. The ability of AFH to use its scale to provide competitively priced access to the investment market for the Mass Affluent strata of the UK, traditionally only enjoyed by High Net Worth individuals, is expected to enhance a growing client base whilst the use of technology will create efficiencies and provide our clients and advisers with greater access and tools to simplify the management of their investments.

In recognition of the technological opportunities identified by the Board, during 2016 the Company began investing in its digital transformation to open new business channels whilst enhancing the experience of our existing clients and advisers and providing further operational efficiencies within the business. This programme is budgeted to extend into 2018 during which period the Company will invest over £1 million in digital infrastructure projects as the business develops its captive distribution channels to provide tailored advice and investment management solutions to both advisers and clients.

Financial Review

During the year the Company enjoyed strong revenue growth in spite of economic and political uncertainty with double digit growth in our funds under management. This was reflected in a significant rise in recurring fee income, which reflected an increase in our average annualised gross revenue per adviser to above £165,000. Total revenue for the year increased by 15% to £24.1 million (2015: £21.0 million) whilst gross margins increased from 52% to 55% and EBITDA (net cash generation from trading) increased by 29% from £2.8 million to £3.6 million. Post tax earnings attributable to shareholders showed a similarly healthy increase of 42% from £1.2 million to £1.7 million.

During 2016, recurring revenue increased to £16.4 million (2015: £13.6 million) to represent 68% of total income for the year. The Directors believe this level of recurring revenue confirms the strength of the Company's financial model. Over 90% of the Company's total ongoing operating cost base is