AFH Financial Group sets new growth targets after stellar year

Financial planning-led wealth management firm AFH Financial Group issued its consolidated audited results for the year ended 31 October on Monday, which it said reflected continued growth, an increase in earnings per share of 43%, and a 50% improvement in the dividend per share.

The AIM-traded firm said it saw “exceptional” organic growth during the year, delivered through its captive distribution model, with revenues up 51% to £50.7m.

Its underlying EBITDA rose 85% to £10.4m, with the underlying EBITDA margin at 21% compared to 17% a year earlier.

The company’s profit after tax surged 94% to £6m, with earnings per share up 43% to 16p and underlying earnings per share ahead 34% at 22.7p.

Its dividend per share was lifted by 50% to 6p.

AFH Financial Group said funds under management at year-end were 58% higher than a year earlier, at £4.4bn.

The firm said it was in a position of “significant” growth potential, seeing increasing organic demand for financial planning-led wealth management services.

It also pointed to its proven track record of acquisitions and integrations, with the average deferred payout for acquisitions reaching a performance milestone exceeding 90% of the target deferred consideration during the year.

AFH said it was “well-positioned” to continue to take advantage of ongoing IFA market consolidation, adding that it had delivered operational efficiencies and improved experience to clients through its investment in technology and infrastructure, and reducing investment costs by leveraging its increased scale.

New three-to-five year aspirational targets had been set for funds under management to reach £10bn, with revenues per year achieving £140m and an underlying EBITDA margin of 25% on revenue.

AFH Financial Group said its balance sheet remained “strong” following a successful £15m placing, completed in October, adding that it was standing on “solid foundations” to deliver on its strategy to become the top financial planning-led investment manager in the UK.

“I am encouraged by the strong progress we made in 2018 as we continue to deliver on our strategy of harnessing solid organic growth with value adding acquisitions, with the aim of becoming the leading financial planning-led investment manager in the UK,” said chief executive officer Alan Hudson.

“These excellent full year results have been driven by the continued increase in our recurring revenue and our underlying EBITDA margin exceeding 20%, the achievement of the first of three medium term financial aspirational targets that we set in 2017.

“As announced on 3 December, the second of these targets, achieving funds under management in excess of £5bn, was met following the year-end and the board is confident that the final aspirational target of revenues of £75m per annum will be achieved ahead of our original expectations.”

Hudson said that notably, the year under review produced its fifth consecutive year of growth and improved profitability since joining AIM in 2014.

“Increased revenues and improved margins resulted in a 43% increase in earnings per share to 16.0p after considering the dilutive impact of our successful fundraisings in December 2017 and October 2018.

Underlying earnings per share, excluding amortisation of our acquired client portfolios increased by 34% to 22.7p.”

The company’s strategy to increase shareholder value through the expansion of the AFH community remained at the heart of its growth, Hudson explained.

“This strategy continues to be driven by a combination of organic growth through greater productivity of our advisers and by value accretive acquisitions.

“To this end, and in light of the strong financial performance seen in 2018 and first three months of the new financial year, we have set three new three to five year aspirational targets, which if achieved will further cement our position as one of the leading financial planning led-investment management companies in the UK.

“Looking to the year ahead, we strive to continue to deliver on this year's exceptional progress through continued organic growth and the integration of further acquisitions and look forward to updating shareholders on our developments and milestones as the year progresses.”