Listed financial advisory firm AFH has revealed total revenue for the full year was up by 40 per cent to £21m - from £15m in 2014 - with the second half being boosted by acquisitions made during the year.
Consolidated results for the period ending 31 October, published this morning (25 January), also showed earnings before tax rising 115 per cent - from £1.3m to £2.8m - on the back of 11 acquisitions during 2015.
Excluding the £240,000 non-recurring cost of operating IFS UK Limited, which was acquired on 30 April 2015, as a separate business during its integration and which was anticipated and reported at the time of the acquisition, earnings before tax rose to £3.05m.
Post tax earnings attributable to shareholders showed a similarly healthy increase from £600,000 to £1.2m.
Revenue growth was driven by recurring fee income, which increased average annualised gross revenue per adviser to £143,000.
This was in part due to AFH clients deferring pension advice and investment, according to chairman John Wheatley, who added following the general election in May, the level of new business has increased significantly.
In terms of the acquisitions, the 11 deals came at an average capped consideration of slightly more than £1m.
Five of which were asset purchases, where the client databases and ongoing revenue streams were acquired.
The remaining six were acquired by purchasing 100 per cent of the equity shares with a significant proportion of the consideration payable on a deferred basis.
The transactions were financed from a positive trading cash flow and the equity and unsecured loan stock raised during 2014 as well as in January and May 2015.
Mr Wheatley also mentioned that the firm “invested heavily” in physical and technological infrastructure to support additional growth planned for 2016 and future years.
“In September 2015, we increased our office space at AFH House in Bromsgrove by 50 per cent, and during the second half upgraded both our internal IT capacity and our ability to respond to the increasing technology risks currently affecting all businesses.”
AFH’s cost base, excluding depreciation, amortisation and non-cash share-based payments, increased by £1.9m to £8.2m, comprising of increased staff investment, which represents over 65 per cent of total expenditure and the infrastructure supporting continued business growth.
At the end of October, the firm held cash and cash equivalents of £3.8m, down from £5.7m in 2014.
The major cash outflows were £4.23m in initial and deferred payments for acquisitions purchased in the period 2013 to 2015.
The results noted the board believes that all future deferred payments for acquisitions completed during the year will be financed from existing cash resources and revenue generated by those acquisitions during the earn-out periods.
Chief executive Alan Hudson commented that during the year, funds under management with ongoing fee agreements in place increased to about £1.8bn; up from £900,000 during the previous period.
He said: “While almost £700m was added as a result of acquisitions during the period, over £200m represented inflows from existing and new clients of the core business. Approximately 90 per cent of new business has been placed on our discretionary service, which at the year-end managed over £700m.”
Adviser numbers increased to 158 as at the end of October, up from 136 in 2014, including both advisers joining from acquisitions and those recruited individually (net of retiring IFAs).
Mr Hudson added the internal market facilitated by the company continues to offer an opportunity for retiring advisers to realise the growth in the value of their client base, while enabling younger advisers within the group to acquire client portfolios in a controlled environment.
“It is expected this will continue to develop further.”
peter.walker@ft.com
