AFH Financial Group Plc

March 31, 2014 02:00 ET

Final Results

31 March 2014

AFH Financial Group PLC
("AFH" or the "Group")

Strong Revenue Performance. Profit Growth. Increased Dividend

The Directors of AFH (ISDX:AFHP), a leading Independent Financial Advisory ("IFA") and discretionary wealth
management firm, are pleased to announce the Group's consolidated audited results for the year ended 31
October 2013 and the declaration of a proposed increased dividend of 1.25p per ordinary share.

In preparation for the Group's proposed move to AIM the Financial Statements have been reported under IFRS
with comparative figures for 2012 restated where appropriate.


--  Profit before Tax up 250 % to GBP1.05m (2012: GBP0.3m)
--  Revenues up 50% to GBP10.8m (2012: GBP7.2m)
--  EBITDA increased 140% to GBP1.2m (2012: GBP0.5m)
--  Gross margin maintained at 52%
--  Recurring Revenue represents 51% of Group Revenue (2012: 50%)
--  Proposed dividend of 1.25p per share (2012: 1.0p)
--  Strong Balance Sheet with Net Assets of GBP7.3m, an increase of 78%
--  Six acquisitions made during the year for a maximum consideration of
--  Shape Financial Limited in July 2013 marked AFH's largest transaction to
--  Advisor numbers increased 30% to 122 (2012: 94)

Commenting Alan Hudson, Chief Executive of AFH Financial Group PLC, said:

"I am delighted with the strength of the Group's performance during the year. As noted, AFH has invested in
strengthening its management and to prepare itself for anticipated growth. The current year has started in
line with the Directors' expectations as the market continues to be active and the impact of the 2013
acquisitions is recognised. The Directors are confident that the Group is well positioned to take advantage
of market opportunities."

The Directors of AFH Financial Group PLC are responsible for the content of this announcement.

For further information please contact:

AFH Financial Group PLC +44 (0)1527 577 775
Alan Hudson, Chief Executive
Paul Wright, Chief Financial Officer

Peterhouse Corporate Finance Limited +44 (0)20 7469 0930
(ISDX Corporate Adviser)
Mark Anwyl
Duncan Vasey

Yellow Jersey PR Limited +44 (0)7799 003 220
(Financial PR)
Dominic Barretto
Kelsey Traynor

Chairman's Statement

During the period under review the Group showed continued growth through its existing IFA operations together
with additional growth through strategic and complementary acquisitions.

In October 2013, the Group raised additional equity capital together with the successful launch of an 8%
Unsecured Bond due 2020, issued at par. Both AFH's equity and bonds are currently traded on the ISDX Growth
Market. The additional equity and loan capital has enabled the Group to continue its acquisition led growth
on a selective basis and allowed the Group to take advantage of attractive opportunities as they have become
available. In particular the acquisition of Shape Financial Limited ("Shape"), with its fifteen advisers, in
July 2013 marked a further development in the Group's strategy as the largest transaction undertaken by the
Group to date. I am pleased to report that the integration of Shape into the Group has progressed well.

In addition to Shape, the Group completed five acquisitions of IFA practices during the year. The post-
acquisition results of these businesses have been consolidated into the Group's financial results for the
year. The acquisitions increased advisor numbers by 19 during the year and at 31 October 2013 the total
number of advisers was 122, an increase of 28 (30%) during the year.

Financial Results

As previously announced, the Group will be seeking a move to the Alternative Investment Market (AIM) during
the current year. In preparation for this move, the Group is presenting its Financial Statements under IFRS
and has restated, where necessary, its 2012 results. As part of this process the Directors have restated the
acquisition of AFH Group Limited by AFH Financial Group PLC in 2011 under merger accounting principles. This
has had the effect of reducing both the Group's Share Premium account and Fixed Asset Investments to ensure
that future dividend flows are not restricted by the Group structure.

Revenue for the year was GBP10.8m, an increase of 50% compared to the previous year. Gross margins remained
at 52% (2012: 52%). Recurring revenue represented 51% (2012: 50%) of total revenue.

During the second half of the year the Group invested further in its infrastructure and head office to
support the current and future projected growth. As a result, administrative expenditure increased by 38% to
GBP4.6m. Further investment is anticipated as the Group continues its growth strategy. The Group reported an
increase of 250% in Profit Before Tax to GBP1.05m, whilst Earnings per Share increased significantly by 340%
to 5.3p per share (2012: 1.2p).

Cash Position

The Group remains free of bank or secured debt and maintains healthy cash balances. At the year-end, cash and
cash equivalents totalled GBP4.3m, boosted by the equity and bond fund raising announced in August 2013 and
completed in October 2013. As a result the Group is well placed to continue to make suitable acquisitions as
opportunities arise.


As previously announced the Group intends to maintain a progressive dividend policy whilst recognising the
requirement to maintain cash within the business to fund its growth strategy. The Directors have considered
these opposing requirements and in the light of the performance during the year under review propose a
dividend of 1.25p per share, an increase of 25% over the 2012 dividend (1.0p). Subject to shareholders'
approval at AFH's forthcoming Annual General Meeting, the dividend will be paid on 16 May 2014 to
shareholders on the register of members at the close of business on 11 April 2014.

Employees and Advisers

The profitable growth of AFH is due to the hard work and professional approach of our staff and advisers. I
would like to formally thank our staff and advisers for the contribution they have made in a year where we
have continued to grow our business successfully. It is our aim to become the employer of choice for staff
and it is in response to the continued support we receive from our staff that we continue to develop and
promote our people from within 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 realises the delivery
of our strategy each year.


The Directors believe that there is a growing requirement for a professional, financial planning led approach
to wealth management delivered by trusted personal advisers. AFH has delivered excellent growth to date based
on this understanding and will continue to seek further opportunities to expand its client base through both
organic and acquisitive growth.

The Group is profitable and cash generative with a strong balance sheet for its current size. Our strategy
remains to grow in our traditional areas of strength whilst enhancing our client portfolio to drive increased
profitability. The Directors continue to actively seek appropriately priced acquisition opportunities with a
comparable culture to AFH to generate incremental opportunities for the Group.

Our long term aim is to grow our client base through increased adviser numbers and greater productivity
afforded by the AFH structure and centralised support functions. The progress made during 2013 and into the
early months of the current financial year allow the Directors to view the prospects for 2014 and beyond with

John Wheatley

Chief Executive's Report

2013 was a year of continued growth for the Group with Revenues growing by 50% to GBP10.8m. It is
particularly encouraging to note that this growth was achieved without a reduction in our gross margins and
on the basis of strong recurring revenue which totalled GBP5.5m for the year.

The Group successfully completed the acquisition and integration of six IFA operations during the year,
spending GBP620,000 in initial consideration with the balance being deferred consideration up to a total
maximum of GBP3.3m, to be paid subject to earn out conditions over a two year period. These acquisitions have
broadened the national reach of AFH as well as adding valuable clients to our portfolio. The administration
of all acquisitions has been assumed into our Bromsgrove Head Office, which has been expanded to support
these and future acquisitions.

Adviser numbers grew during 2013 to 122 at 31 October 2013 an increase of 28 (approximately 30%) over the
period. This reflected both advisers joining through acquisitions and those recruited individually. The Group
has established an internal market for retiring advisers to realise the growth in value of their client base
within AFH and for younger or other advisers seeking to build their client base, to acquire portfolios within
the Group. This internal market also secures the ongoing relationship with clients and recurring revenue for

Expenditure during the period grew by GBP1.2m to GBP4.6m, reflecting the increased central overhead to
support the growing IFA and client base. People costs remain the largest component of the Group overhead,
accounting for GBP2.7m (59%) of total Administrative expenditure in the year (2012:GBP1.9m (57%)). The 2013
figures include a full year cost of the Group's new Head Office, AFH House, in Bromsgrove.

The Group reported increased EBITDA of GBP1.2m representing an increase of 140% over the prior year
comparative figure of GBP0.5m. This is a measure used by the Directors' to assess the cash generation from
the ongoing operations. The EBITDA margin of 11% on Revenue (2012: 7%), reflects the scalability of the
business given the level of investment in the central overhead noted above.

The Group strengthened its Balance Sheet during 2013 and at the year-end had net cash and cash equivalents of
GBP4.3m. The Group continues to trade profitably, generating additional cash for the business. As at 31
October 2013 the Group had maximum deferred earn out liabilities on existing acquisitions of GBP4.1m. Due to
the structure of the agreements, these deferred liabilities are expected to be self-funding in future

Fundraising and AIM

As noted by the Chairman, in August 2013 the Group raised GBP2.55m equity capital and GBP0.75m through an 8%
Unsecured Bond 2020. The interest in these capital raisings was encouraging; AFH's ordinary shares are
currently an EIS qualifying investment and the Directors are aware of further investment interest from
existing and potential shareholders.

In February 2014 AFH announced its intention to move to AIM as part of its long term strategy to access the
institutional capital markets in order to provide finance for its acquisitive programme and to generate
greater liquidity for its equity shares. The Group has set a timetable for an IPO by the end of Q2 and
remains on target to achieve this timeline.

Property Fund

As we announced in November 2012 the Group launched the St. John's High Yield Property Fund during the year.
The Fund is believed to be the first Property Authorised Investment Fund ("PAIF") to be available to retail
investors in the UK. The FCA authorised Fund is offered to AFH clients seeking to diversify their investment
portfolios and gain exposure to a low volatility asset class with yields of between 6% and 9%.


In June 2013 the Group announced that it had established AFH Legal Ltd., a wholly owned subsidiary which had
been licenced by the Solicitors Regulatory Authority as an Alternative Business Structure, authorised to
provide a range of legal services. The Directors believe that Wills, Trusts and Estate planning forms the
corner stone of professional financial planning for its clients, and that the ability to provide these
services in a regulated environment will significantly enhance the client service.

Post year end

Following the year end the Group has strengthened its management and operational teams, in particular through
the recruitment to the board of Paul Wright as Chief Financial Officer and Sue Lewis as a Non-Executive
Director. These appointments have been announced to the market along with profiles of the experience that
they bring to the Group. We have also appointed experienced managers in our operating subsidiary companies to
develop our back office and operating systems in line with our future requirements.

Current year trading

The current year has started in line with the Directors' expectations as the market continues to be active
and the impact of the 2013 acquisitions is recognised. As noted, the Group has invested in strengthening its
management and to prepare itself for anticipated growth in the current year and the Directors are confident
that the Group is well positioned to take advantage of market opportunities.

Alan Hudson
Chief Executive Officer




                                                        2013           2012
                                                         GBP            GBP

Revenue                                           10,797,092      7,200,950

Cost of sales                                     (5,165,160)    (3,471,201)

Gross profit                                       5,631,932      3,729,749

Administrative expenses                           (4,561,124)    (3,435,547)

Operating profit                                   1,070,808        294,202

Finance income                                           987         13,494
Finance costs                                        (22,512)       (12,631)

Profit on ordinary activities before taxation      1,049,283        295,065

Income tax expense                                  (245,277)      (127,137)

Profit on ordinary activities after taxation         804,006        167,998

Other comprehensive income                                 -              -

Total comprehensive income for the year              804,006        167,998


Earnings per share (pence)

Basic                                                 5. 332         1. 177

Diluted                                               5. 191         1. 137





                        Group                        Company

                                             1                             1
                                      November                      November
                      2013      2012      2011      2013      2012      2011
                       GBP       GBP       GBP       GBP       GBP       GBP

 assets          7,376,148 4,351,423 2,111,638         -         -         -

Property, plant
 and equipment     251,212   144,312    60,402         -         -         -
Investments            598       598       514 1,529,547 1,290,566 1,290,464

                 7,627,958 4,496,333 2,172,554 1,529,547 1,290,566 1,290,464

Current assets
Trade and other
 receivables     2,624,769 2,000,336   938,143 2,814,152 2,116,153     3,000

Cash and cash
 equivalents     4,333,949   922,957 1,722,273 3,313,367   651,925 1,502,162

                 6,958,718 2,923,293 2,660,416 6,127,519 2,768,078 1,505,162

Total assets    14,586,676 7,419,626 4,832,970 7,657,066 4,058,644 2,795,626


Trade and other
 payables        3,933,829 2,039,288 1,330,193   149,473    10,608    17,108
Current tax
 liabilities       311,565   214,902   214,410    27,605    12,322     7,858

 liabilities        50,000   225,000         -    50,000   225,000         -

                 4,295,394 2,479,190 1,544,603   227,078   247,930    24,966

Net current
 assets          2,663,324   434,026 1,115,813 5,900,441 2,520,148 1,480,196




                        Group                        Company

                                             1                             1
                                      November                      November
                      2013      2012      2011      2013      2012      2011
                       GBP       GBP       GBP       GBP       GBP       GBP
Trade and other
 payables        2,219,920   852,877   242,372         -         -         -
 liabilities       752,000         -         -   752,000         -         -
Deferred tax
 liabilities        33,998    15,681    13,045         -         -         -

 liabilities     7,301,312 3,347,748 1,800,020   979,078   247,930    24,966

Net assets       7,285,364 4,071,878 3,032,950 6,677,988 3,810,714 2,770,660


Share capital    1,711,450 1,478,037 1,409,687 1,711,450 1,478,037 1,409,687

Share premium
 account         4,476,833 2,152,962 1,537,812 4,476,833 2,152,962 1,537,812
Other capital
 reserves          229,565   229,565    42,135   229,565   229,565    42,135
 earnings          867,516   211,314    43,316   260,140   (49,850)(218,974)

Total equity     7,285,364 4,071,878 3,032,950 6,677,988 3,810,714 2,770,660





                                       Share     Other
                            Share    premium   capital  Retained
                          capital    account  reserves  earnings      Total
                              GBP        GBP       GBP       GBP        GBP

Balance at 1 November
 2011                   1,409,687  9,867,812    42,135    43,316 11,362,950
Prior period adjustment         - (8,330,000)        -         - (8,330,000)

As restated             1,409,687  1,537,812    42,135    43,316  3,032,950
Profit for the year             -          -         -   167,998    167,998
Other comprehensive
 income                         -          -         -         -          -

Total comprehensive
 income                         -          -         -   167,998    167,998

                        1,409,687  1,537,812    42,135   211,314  3,200,948
Issue of share capital     68,350    615,150         -         -    683,500

Share-based payment
 transaction                    -          -   187,430         -    187,430

Balance at 31 October
 2012                   1,478,037  2,152,962   229,565   211,314  4,071,878
Profit for the year             -          -         -   804,006    804,006
Other comprehensive
 income                         -          -         -         -          -

Total comprehensive
 income                         -          -         -   804,006    804,006

                        1,478,037  2,152,962   229,565 1,015,320  4,875,884
Issue of share capital    233,413  2,323,871         -         -  2,557,284

Dividends                       -          -         -  (147,804)  (147,804)

Balance at 31 October
 2013                   1,711,450  4,476,833   229,565   867,516  7,285,364





                                                 2013                  2012
                                       GBP        GBP        GBP        GBP

Cash generated from operations                997,471               (16,907)

Tax paid                                     (186,711)             (179,964)

Net cash inflow/(outflow) from
 operating activities                         810,760              (196,871)

Investing activities
Purchase of property, plant &
 equipment                        (161,389)             (113,391)
Purchase of other intangible
 assets, net of cash            (4,058,832)           (2,316,746)
Proceeds from disposals of other
 intangible assets               1,079,999                33,854
Purchase of subsidiaries                 -                   (62)

Proceeds from sale of
 subsidiaries                            -                   100
Proceeds from sale of property,
 plant & equipment                     284                     -
Interest received                      987                13,494

Net cash used in from investing
 activities                                (3,138,951)           (2,382,751)

Financing activities
Proceeds from issue of shares    2,588,139               683,500
Share issue costs                  (30,855)                    -
Issue of convertible loans               -               225,000
Proceeds from borrowings         4,309,667             2,434,836

Repayment of borrowings           (957,452)           (1,550,399)
Interest paid                      (22,512)              (12,631)
Dividends paid to owners of the
 company                          (147,804)                    -

Net cash generated from
 financing activities                       5,739,183             1,780,306

Net increase/(decrease) in cash
 and cash equivalents                       3,410,992              (799,316)

Cash and cash equivalents at
 beginning of year                            922,957             1,722,273

Cash and cash equivalents at end
 of year                                    4,333,949               922,957


Contact Information

  • AFH Financial Group Plc