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 £13.9 million (H1 2016: £11.7 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 £2.03 million (H1 2015: £1.50 million)

·     Underlying EBITDA* margin increased to 14.6% from 12.8%

·     Profit before tax up 34% to £1.15 million (H1 2016: £0.86 million)

·     Underlying Earnings per share* up 27% to 6.17 pence (H1 2016: 4.84 pence)

·     Funds under Management above £2.2bn, up 17% (H1 2016: £1.88bn)

Confident Outlook

·     Strong balance sheet to support further acquisitions

·     Cash reserves of £12.6 million, following on from successful £10 million placing (30 April 2016: £7.1 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 £13.9m (H1 2016: £11.7m), 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 £0.5m and represented 4% of total revenue for the period.

Adviser numbers grew to 154 during the period whilst annualised revenue per adviser increased to £180,000 (H1 2016 £156,000).

Gross margins increased to 56% (H1 2016: 55%).  The Group reported underlying EBITDA of £2.03m, an increase of 35% over the same period last year (£1.50m).

The Group reported an increase of 34% in profit before tax to £1.15m 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 £128m (gross) of new funds were invested through AFH from existing and new clients.

April fundraising

During the period the Company raised £10m gross (£9.5m 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 £12.6m. Unsecured non-convertible bonds of £0.75m and £2.14m 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 £20m per month. During the period 97% of these funds were invested on a discretionary basis. Funds under Management exceeded £2.2bn 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 £4.5m. Initial consideration of £2m was paid with the balance to be earned during the next two years. The Company also paid £1.5m 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 £5.6m, of which £2.25m 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 £4.5m, of which £1.5m 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