ConsolidatorJun 1 2020

AFH pauses acquisitions for second time in 10 months

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AFH pauses acquisitions for second time in 10 months
ByRachel Mortimer

National advice consolidator AFH Financial Group has again suspended its acquisition drive, this time in response to the coronavirus outbreak. 

It comes as the company today (June 1) confirmed it had temporarily cut costs of £3m in a bid to "address the likely impact of lockdown on top line revenue". 

In a six-month trading update to the market this morning AFH confirmed it was open to future consolidation, but had temporarily suspended acquisitions in light of the pandemic and planned to focus on "cash generation and organic growth".  

The consolidator has completed roughly 50 acquisitions since it listed on the Alternative Investment Market (AIM) in 2014, but in September last year the company pointed to prevailing economic and political uncertainty as cause for pausing its buying spree.

But before the global pandemic hit earlier this year AFH had confirmed it was back on the acquisition trail, revealing it had a cash pot of £17.25m to spend on deals. 

In today's update the company said: "Following a period of consolidation, the group is continuing to focus on cash generation and organic growth.

"Whilst the group remains open to future select acquisitions, should suitable opportunities present themselves, with a focus on smaller IFAs and larger businesses where the majority of advisers are employed or equity participants in the target company, following the current Covid-19 outbreak, evaluation of acquisition opportunities has been temporarily suspended." 

AFH also confirmed it had taken "early action" in March to temporarily remove £3m of annualised costs from the business, including senior management salary cuts and placing "non-critical" projects on hold. 

For the six months to the end of April the advice firm reported increased revenues of £38.2m, up by 5 per cent from £36.6m in the same period last year, and funds under management rallied to £5.95bn, up from £5.4bn in the first half of the 2019 financial year. 

The company's core business of financial advice and investment management represented 79 per cent of its revenues during the period, with AFH readying itself for an increased demand for financial planning among the "mass affluent" as a result of the economic upheaval seen so far this year. 

Alan Hudson, chief executive of AFH, said: "Throughout the ongoing crisis, our efforts have been focused on protecting the health, safety and wellbeing of our employees and their families, while continuing to deliver the same high level of service to clients and maintaining long-term value creation for shareholders.

"The company adapted quickly to the challenges presented in March and, by the end of the month, had over 400 staff and all advisers working from home with full access to AFH’s web-based infrastructure, which has been the focus of significant investment since 2015.