Investments  

Adviser consolidator has £17.25m acquisitions war chest

Adviser consolidator has £17.25m acquisitions war chest

Financial adviser consolidator AFH has a cash pot of £17.25m to spend on buying firms, according to the latest accounts of the business, which were released to the stock exchange this morning (20 January). 

According to the statement, which covers the year to the end of October 2019, the company raised £27m of debt in the second half of 2019, from a combination of a £12m loan from HSBC and £15m from issuing loan stock. 

Since that cash was raised, £9.75m of it has been spent on acquiring advice firms. 

The company completed eight acquisitions in the year to the end of December 2019. 

Alan Hudson, company chief executive, said: “The group's strategy to increase shareholder value through the expansion of the AFH community remains at the heart of our growth.

"This strategy continues to be driven by a combination of organic growth through greater productivity of our advisers and by value accretive acquisitions financed on an earn out model.

"This approach has enabled the group to enjoy annual double-digit organic inflows of funds under management and to maintain our low level of outflows in spite of the market pressures; to maintain our high levels of recurring revenue since we joined AIM in 2014 and to maintain gross margins and generate operating efficiencies to drive growth in earnings per share.”

For the year to the end of October 2019, the company had funds under administration of £6.2bn, an increase of 40 per cent on the previous year. Mr Hudson said that inflows excluding acquisitions were more than 10 per cent higher during the year. 

Profit after tax was 80 per cent higher at £10.8m.  

He said a focus of 2020 would be to increasingly use digital marketing and technology to grow the business organically. 

One note of caution was sounded by the company’s chairman, John Wheatley, in his commentary on the results, however.

He said AFH had deviated somewhat from its typical approach to acquisitions in 2018 by buying firms which employed many advisers who are not shareholders in the firms where they work.

He said the gains from these acquisitions had taken longer to come through than the gains from acquisitions where all of the advisers that work in a firm own a stake in the business.

AFH’s acquisitions typically involve an “earn out” whereby shareholders get paid more cash in future if the company hits certain targets.   

david.thorpe@ft.com

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